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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Aptiv PLC (NYSE:APTV).
Aptiv PLC (NYSE:APTV) was in 44 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 49. APTV investors should pay attention to an increase in hedge fund sentiment recently. There were 38 hedge funds in our database with APTV positions at the end of the third quarter. Our calculations also showed that APTV isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the eyes of most stock holders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the crème de la crème of this group, approximately 850 funds. It is estimated that this group of investors manage most of the hedge fund industry's total asset base, and by keeping an eye on their highest performing investments, Insider Monkey has uncovered several investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
Dan Loeb of Third Point
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Do Hedge Funds Think APTV Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the third quarter of 2020. By comparison, 46 hedge funds held shares or bullish call options in APTV a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the number one position in Aptiv PLC (NYSE:APTV). Impax Asset Management has a $351.6 million position in the stock, comprising 2.2% of its 13F portfolio. Coming in second is Third Point, led by Dan Loeb, holding a $195.4 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of David Blood and Al Gore's Generation Investment Management, Ken Griffin's Citadel Investment Group and Brandon Haley's Holocene Advisors. In terms of the portfolio weights assigned to each position Engine No. 1 LLC allocated the biggest weight to Aptiv PLC (NYSE:APTV), around 8.47% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, dishing out 4.16 percent of its 13F equity portfolio to APTV.
Now, some big names were leading the bulls' herd. Third Point, managed by Dan Loeb, initiated the largest position in Aptiv PLC (NYSE:APTV). Third Point had $195.4 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also made a $46.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Chris James's Engine No. 1 LLC, Larry Robbins's Glenview Capital, and Javier Velazquez's Albar Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Aptiv PLC (NYSE:APTV) but similarly valued. These stocks are Parker-Hannifin Corporation (NYSE:PH), Ford Motor Company (NYSE:F), Trane Technologies plc (NYSE:TT), Centene Corporation (NYSE:CNC), Xilinx, Inc. (NASDAQ:XLNX), Lloyds Banking Group PLC (NYSE:LYG), and Barclays PLC (NYSE:BCS). This group of stocks' market values match APTV's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PH,56,1601655,5 F,41,1652221,3 TT,34,998785,-3 CNC,56,2646289,-2 XLNX,66,3837083,20 LYG,5,4389,0 BCS,12,62951,6 Average,38.6,1543339,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1543 million. That figure was $1354 million in APTV's case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. Aptiv PLC (NYSE:APTV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APTV is 68.9. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately APTV wasn't nearly as popular as these 10 stocks and hedge funds that were betting on APTV were disappointed as the stock returned 10.4% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.