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Were Hedge Funds Right About Autohome Inc (ATHM)?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Autohome Inc (NYSE:ATHM) based on that data.

Autohome Inc (NYSE:ATHM) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 24. ATHM investors should pay attention to an increase in hedge fund sentiment in recent months. There were 16 hedge funds in our database with ATHM holdings at the end of December. Our calculations also showed that ATHM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we're going to review the latest hedge fund action regarding Autohome Inc (NYSE:ATHM).

Do Hedge Funds Think ATHM Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in ATHM a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is ATHM A Good Stock To Buy?
Is ATHM A Good Stock To Buy?

Of the funds tracked by Insider Monkey, William B. Gray's Orbis Investment Management has the largest position in Autohome Inc (NYSE:ATHM), worth close to $304.7 million, corresponding to 2.2% of its total 13F portfolio. On Orbis Investment Management's heels is Segantii Capital, led by Simon Sadler, holding a $156.2 million position; 6.7% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions consist of D. E. Shaw's D E Shaw, Francois Rochon's Giverny Capital and Ray Dalio's Bridgewater Associates. In terms of the portfolio weights assigned to each position Segantii Capital allocated the biggest weight to Autohome Inc (NYSE:ATHM), around 6.7% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, dishing out 2.18 percent of its 13F equity portfolio to ATHM.

Consequently, specific money managers were breaking ground themselves. Segantii Capital, managed by Simon Sadler, established the largest position in Autohome Inc (NYSE:ATHM). Segantii Capital had $156.2 million invested in the company at the end of the quarter. James Dinan's York Capital Management also made a $10.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew L Pinz's Pinz Capital, George Soros's Soros Fund Management, and Noam Gottesman's GLG Partners.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Autohome Inc (NYSE:ATHM) but similarly valued. We will take a look at Lennox International Inc. (NYSE:LII), Vail Resorts, Inc. (NYSE:MTN), China Eastern Airlines Corp. Ltd. (NYSE:CEA), FactSet Research Systems Inc. (NYSE:FDS), Brookfield Renewable Partners L.P. (NYSE:BEP), Vedanta Ltd (NYSE:VEDL), and Equity Lifestyle Properties, Inc. (NYSE:ELS). This group of stocks' market caps resemble ATHM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LII,25,395757,-2 MTN,36,1091529,5 CEA,3,2009,2 FDS,30,355190,0 BEP,24,223248,4 VEDL,10,85028,0 ELS,29,620521,5 Average,22.4,396183,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $589 million in ATHM's case. Vail Resorts, Inc. (NYSE:MTN) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 3 bullish hedge fund positions. Autohome Inc (NYSE:ATHM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATHM is 52.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately ATHM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ATHM investors were disappointed as the stock returned -44.3% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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