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Hedge Funds Aren’t Crazy About AutoNation, Inc. (AN) Anymore

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Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility and underperformance. The time period between the end of June 2015 and the end of June 2016 was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have been underperforming the large-cap indices. However, things have dramatically changed over the last 5 months. Small-cap stocks reversed their misfortune and beat the large cap indices by almost 11 percentage points since the end of June. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of AutoNation, Inc. (NYSE:AN).

AutoNation, Inc. (NYSE:AN) investors should be aware of a decrease in hedge fund sentiment of late. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Acadia Healthcare Company Inc (NASDAQ:ACHC), National Fuel Gas Co. (NYSE:NFG), and Dolby Laboratories, Inc. (NYSE:DLB) to gather more data points.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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Now, we’re going to go over the recent action surrounding AutoNation, Inc. (NYSE:AN).

Hedge fund activity in AutoNation, Inc. (NYSE:AN)

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, 11% down from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
AN
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Edward Lampert’s ESL Investments has the largest position in AutoNation, Inc. (NYSE:AN), worth close to $296.8 million and accounting for 33.7% of its total 13F portfolio. The second largest stake is held by Ricky Sandler of Eminence Capital, with a $164.1 million position; 2.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include Richard Chilton’s Chilton Investment Company, Murray Stahl’s Horizon Asset Management and Michael Larson’s Bill & Melinda Gates Foundation Trust.

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