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What Do Hedge Funds Think About Auto Maker Stocks?

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Last year was an interesting one for auto manufacturers. From one side, companies engaged in the manufacturing of automobiles have been under scrutiny of regulators amid large safety recalls, which also affected the attitude of consumers. On the other side, despite this, the sales of vehicles in the U.S went up significantly with the best sales figures being reported in many years. As Autodata, a tracking company, stated in its latest report, during 2014, around 16.5 million new vehicles were sold, up by 1.0 million versus 2013. There are many reasons for this growth: a growing economy that drags down unemployment figures, low gas prices, and accessibility of different financing options for purchasing new cars.

Ford F

However, despite growth in sales, the auto manufacturing industry returned a mild 6.7% during the last year and investors seemed to lose confidence in these companies as our data shows. Generally, auto manufacturers are large-cap companies, such as General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F) and Tesla Motors Inc (NASDAQ:TSLA). Our strategy that involves tracking the activity of some of the best investors in the world shows that generally large-cap picks can’t help investors in beating the market, but these stocks have a lot of benefits such as the possibility of being able to invest large amounts of capital with significant long-term return prospects, with less risk. Even though our strategy is focused primarily on small-cap stocks, following larger companies can also provide some interesting insights for retail investors.

Let’s get back to our auto manufacturer stocks. The most popular of them at the end of 2014 was General Motors Company (NYSE:GM), for obvious reasons, as it is one of the largest auto manufacturers in the world. Among 737 funds that we track, General Motors could be found in the 13F filings of 107 of them, down from 118 funds in the previous quarter. However the value of the positions held by these funds inched up to $6.07 billion, from $6.04 billion in the previous quarter. One of the top shareholders of General Motors Company (NYSE:GM) was Warren Buffett, who owned 41.0 million shares as of the end of 2014, adding 1.0 million shares during the fourth quarter.

General Motors Company (NYSE:GM) was affected the most by safety recalls, which cost the company over $4.0 billion in 2014. In this way, even though the company’s revenues for 2014 went up on the back of strong sales, and totaled $155.93 billion, from $155.43 billion in 2013, the company’s EPS slumped to $1.75 from $2.71. The company is however optimistic that it will be able to handle recall costs and that sales will remain robust as it has raised its dividend by 20% to $0.36 (hasn’t been approved by the board) and plans to further increase it in the near future.

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