We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Autoliv Inc. (NYSE:ALV).
Is Autoliv Inc. (NYSE:ALV) a buy here? Prominent investors are in an optimistic mood. The number of long hedge fund positions moved up by 5 in recent months. Our calculations also showed that ALV isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's view the latest hedge fund action encompassing Autoliv Inc. (NYSE:ALV).
What does smart money think about Autoliv Inc. (NYSE:ALV)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in ALV a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Cevian Capital held the most valuable stake in Autoliv Inc. (NYSE:ALV), which was worth $483.1 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $147.5 million worth of shares. Holocene Advisors, Millennium Management, and Brigade Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cevian Capital allocated the biggest weight to Autoliv Inc. (NYSE:ALV), around 79.4% of its 13F portfolio. LFL Advisers is also relatively very bullish on the stock, designating 5.58 percent of its 13F equity portfolio to ALV.
As aggregate interest increased, specific money managers were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, initiated the largest position in Autoliv Inc. (NYSE:ALV). D E Shaw had $0.8 million invested in the company at the end of the quarter. Hoon Kim's Quantinno Capital also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang's Weld Capital Management, Cliff Asness's AQR Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Autoliv Inc. (NYSE:ALV) but similarly valued. We will take a look at SL Green Realty Corp (NYSE:SLG), XPO Logistics Inc (NYSE:XPO), Canopy Growth Corporation (NYSE:CGC), and Woodward Inc (NASDAQ:WWD). All of these stocks' market caps are closest to ALV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLG,27,447307,-2 XPO,32,2830931,6 CGC,14,42349,5 WWD,22,298847,-3 Average,23.75,904859,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $905 million. That figure was $730 million in ALV's case. XPO Logistics Inc (NYSE:XPO) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 14 bullish hedge fund positions. Autoliv Inc. (NYSE:ALV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ALV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ALV investors were disappointed as the stock returned -43.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.