Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Adient plc (NYSE:ADNT).
Is Adient plc (NYSE:ADNT) a bargain? Prominent investors are turning less bullish. The number of long hedge fund positions were trimmed by 4 lately. Our calculations also showed that ADNT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several tools investors employ to evaluate their holdings. A couple of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top investment managers can trounce the broader indices by a very impressive amount (see the details here).
[caption id="attachment_255017" align="aligncenter" width="400"] David Einhorn of Greenlight Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the recent hedge fund action regarding Adient plc (NYSE:ADNT).
How have hedgies been trading Adient plc (NYSE:ADNT)?
At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in ADNT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Clifton S. Robbins's Blue Harbour Group has the biggest position in Adient plc (NYSE:ADNT), worth close to $59.4 million, amounting to 10.6% of its total 13F portfolio. Sitting at the No. 2 spot is Noah Levy and Eugene Dozortsev of Newtyn Management, with a $19 million position; the fund has 6.6% of its 13F portfolio invested in the stock. Other peers that are bullish contain David Einhorn's Greenlight Capital, Edgar Wachenheim's Greenhaven Associates and Anthony Bozza's Lakewood Capital Management. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to Adient plc (NYSE:ADNT), around 10.57% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, setting aside 6.56 percent of its 13F equity portfolio to ADNT.
Judging by the fact that Adient plc (NYSE:ADNT) has experienced falling interest from the smart money, we can see that there was a specific group of funds that slashed their positions entirely heading into Q4. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP cut the largest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $8.9 million in stock, and George Soros's Soros Fund Management was right behind this move, as the fund sold off about $5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to Adient plc (NYSE:ADNT). These stocks are Provident Financial Services, Inc. (NYSE:PFS), Virtusa Corporation (NASDAQ:VRTU), PBF Energy Inc (NYSE:PBF), and DCP Midstream LP (NYSE:DCP). This group of stocks' market valuations match ADNT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFS,12,26202,-4 VRTU,13,35689,-1 PBF,22,70769,-10 DCP,4,7421,-2 Average,12.75,35020,-4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $205 million in ADNT's case. PBF Energy Inc (NYSE:PBF) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Adient plc (NYSE:ADNT) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on ADNT as the stock returned 87.5% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.