2019 Review: Most Favored Hedge Fund Stocks vs. Ford Motor Company (F)
Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Ford Motor Company (NYSE:F) and compare its performance to hedge funds' consensus picks in 2019.
Ford Motor Company (NYSE:F) investors should be aware of a decrease in enthusiasm from smart money recently. F was in 35 hedge funds' portfolios at the end of the third quarter of 2019. There were 39 hedge funds in our database with F positions at the end of the previous quarter. Our calculations also showed that F isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="alignnone" width="2480"]
Richard S. Pzena of Pzena Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to check out the key hedge fund action surrounding Ford Motor Company (NYSE:F).
Hedge fund activity in Ford Motor Company (NYSE:F)
At Q3's end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in F a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Edgar Wachenheim's Greenhaven Associates has the number one position in Ford Motor Company (NYSE:F), worth close to $317.5 million, corresponding to 6.4% of its total 13F portfolio. Sitting at the No. 2 spot is Richard S. Pzena of Pzena Investment Management, with a $290.5 million position; 1.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass David E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Ford Motor Company (NYSE:F), around 6.42% of its 13F portfolio. Gabalex Capital is also relatively very bullish on the stock, setting aside 2.96 percent of its 13F equity portfolio to F.
Judging by the fact that Ford Motor Company (NYSE:F) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedgies that decided to sell off their positions entirely in the third quarter. Interestingly, Steve Cohen's Point72 Asset Management sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $99.9 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund sold off about $27.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Ford Motor Company (NYSE:F). We will take a look at Prudential Financial Inc (NYSE:PRU), Manulife Financial Corporation (NYSE:MFC), Baidu.com, Inc. (NASDAQ:BIDU), and The Allstate Corporation (NYSE:ALL). This group of stocks' market caps are closest to F's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRU,27,576526,-6 MFC,17,354745,1 BIDU,43,1745303,-1 ALL,44,1900363,7 Average,32.75,1144234,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1144 million. That figure was $1153 million in F's case. The Allstate Corporation (NYSE:ALL) is the most popular stock in this table. On the other hand Manulife Financial Corporation (NYSE:MFC) is the least popular one with only 17 bullish hedge fund positions. Ford Motor Company (NYSE:F) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on F, though not to the same extent, as the stock returned 31.6% during 2019 (as of 12/23) and outperformed the market as well.
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.
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