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Were Hedge Funds Right About American Axle & Manufacturing Holdings (AXL)?

Asma UL Husna

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards American Axle & Manufacturing Holdings, Inc. (NYSE:AXL).

Is American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) a good investment today? Prominent investors are buying. The number of long hedge fund positions increased by 3 in recent months. Our calculations also showed that AXL 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).

[caption id="attachment_25717" align="aligncenter" width="397"] Steven Cohen of Point72 Asset Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader's corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we're going to take a peek at the recent hedge fund action encompassing American Axle & Manufacturing Holdings, Inc. (NYSE:AXL).

What have hedge funds been doing with American Axle & Manufacturing Holdings, Inc. (NYSE:AXL)?

At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in AXL a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) was held by Arrowstreet Capital, which reported holding $20 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $12 million position. Other investors bullish on the company included Redwood Capital Management, Point72 Asset Management, and D E Shaw. In terms of the portfolio weights assigned to each position Redwood Capital Management allocated the biggest weight to American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), around 1.64% of its 13F portfolio. Nut Tree Capital is also relatively very bullish on the stock, setting aside 1.14 percent of its 13F equity portfolio to AXL.

As one would reasonably expect, key hedge funds have jumped into American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL). Point72 Asset Management had $11.3 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management also initiated a $4.4 million position during the quarter. The following funds were also among the new AXL investors: Joel Greenblatt's Gotham Asset Management, Robert Polak's Anchor Bolt Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) but similarly valued. These stocks are RPT Realty (NYSE:RPT), Teekay LNG Partners L.P. (NYSE:TGP), AZZ Incorporated (NYSE:AZZ), and Upwork Inc. (NASDAQ:UPWK). This group of stocks' market caps resemble AXL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPT,13,36928,1 TGP,13,66416,3 AZZ,16,56849,0 UPWK,24,188568,3 Average,16.5,87190,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $96 million in AXL's case. Upwork Inc. (NASDAQ:UPWK) is the most popular stock in this table. On the other hand RPT Realty (NYSE:RPT) is the least popular one with only 13 bullish hedge fund positions. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is not the most popular stock in this group but hedge fund interest is still above average. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately AXL wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AXL were disappointed as the stock returned -61.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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