As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Honda Motor Co Ltd (NYSE:HMC).
Honda Motor Co Ltd (NYSE:HMC) investors should pay attention to a decrease in enthusiasm from smart money recently. HMC was in 7 hedge funds' portfolios at the end of the second quarter of 2019. There were 9 hedge funds in our database with HMC holdings at the end of the previous quarter. Our calculations also showed that HMC isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the recent hedge fund action regarding Honda Motor Co Ltd (NYSE:HMC).
How are hedge funds trading Honda Motor Co Ltd (NYSE:HMC)?
At Q2's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HMC over the last 16 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Honda Motor Co Ltd (NYSE:HMC), worth close to $54.5 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is D. E. Shaw of D E Shaw, with a $14.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Israel Englander's Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Michael Gelband's ExodusPoint Capital.
Seeing as Honda Motor Co Ltd (NYSE:HMC) has experienced a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of hedgies who were dropping their positions entirely by the end of the second quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the biggest investment of the 750 funds followed by Insider Monkey, valued at an estimated $5 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund sold off about $3.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Honda Motor Co Ltd (NYSE:HMC) but similarly valued. We will take a look at Biogen Inc. (NASDAQ:BIIB), TC Energy Corporation (NYSE:TRP), Vodafone Group Plc (NASDAQ:VOD), and ING Groep N.V. (NYSE:ING). This group of stocks' market values resemble HMC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIIB,43,3521939,-6 TRP,12,228464,0 VOD,11,448160,-7 ING,8,429564,-2 Average,18.5,1157032,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $1157 million. That figure was $84 million in HMC's case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Honda Motor Co Ltd (NYSE:HMC) is even less popular than ING. Hedge funds dodged a bullet by taking a bearish stance towards HMC. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HMC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HMC investors were disappointed as the stock returned 0.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.