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Is Ferrari N.V. (NYSE:RACE) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is RACE stock a buy? Ferrari N.V. (NYSE:RACE) investors should pay attention to a decrease in hedge fund sentiment lately. Ferrari N.V. (NYSE:RACE) was in 29 hedge funds' portfolios at the end of December. The all time high for this statistic is 36. There were 31 hedge funds in our database with RACE holdings at the end of September. Our calculations also showed that RACE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Dan Loeb of Third Point
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a gander at the key hedge fund action surrounding Ferrari N.V. (NYSE:RACE).
Do Hedge Funds Think RACE Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the third quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in RACE a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Ferrari N.V. (NYSE:RACE) was held by Ako Capital, which reported holding $335.4 million worth of stock at the end of December. It was followed by Darsana Capital Partners with a $315.6 million position. Other investors bullish on the company included Third Point, D1 Capital Partners, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Alatus Capital allocated the biggest weight to Ferrari N.V. (NYSE:RACE), around 100% of its 13F portfolio. Lansing Management is also relatively very bullish on the stock, earmarking 16.79 percent of its 13F equity portfolio to RACE.
Seeing as Ferrari N.V. (NYSE:RACE) has faced a decline in interest from hedge fund managers, logic holds that there were a few hedge funds that slashed their full holdings in the fourth quarter. Interestingly, Steve Cohen's Point72 Asset Management sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $17.1 million in stock. Till Bechtolsheimer's fund, Arosa Capital Management, also dumped its stock, about $3.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds in the fourth quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Ferrari N.V. (NYSE:RACE) but similarly valued. These stocks are ABB Ltd (NYSE:ABB), Workday Inc (NASDAQ:WDAY), Takeda Pharmaceutical Company Limited (NYSE:TAK), Edwards Lifesciences Corporation (NYSE:EW), PetroChina Company Limited (NYSE:PTR), Itau Unibanco Holding SA (NYSE:ITUB), and HCA Healthcare Inc (NYSE:HCA). This group of stocks' market values resemble RACE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABB,8,467566,-5 WDAY,80,4443166,6 TAK,18,835529,-1 EW,38,1243466,-8 PTR,5,61529,-1 ITUB,19,451744,3 HCA,73,3564991,2 Average,34.4,1581142,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1581 million. That figure was $1527 million in RACE's case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 5 bullish hedge fund positions. Ferrari N.V. (NYSE:RACE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RACE is 43.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately RACE wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); RACE investors were disappointed as the stock returned -7.6% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.