Autoliv Inc. (ALV) Fell Out Of Favor With Hedge Funds

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Autoliv Inc. (NYSE:ALV).

Is Autoliv Inc. (NYSE:ALV) the right investment to pursue these days? Hedge funds were in a pessimistic mood. The number of bullish hedge fund bets retreated by 6 in recent months. Autoliv Inc. (NYSE:ALV) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that ALV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 26 hedge funds in our database with ALV positions at the end of the fourth quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Christer Gardell Cevian Capital

Christer Gardell of Cevian Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Autoliv Inc. (NYSE:ALV).

Do Hedge Funds Think ALV Is A Good Stock To Buy Now?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ALV over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Autoliv Inc. (NYSE:ALV) was held by Cevian Capital, which reported holding $548.3 million worth of stock at the end of December. It was followed by Holocene Advisors with a $52.7 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cevian Capital allocated the biggest weight to Autoliv Inc. (NYSE:ALV), around 73.63% of its 13F portfolio. LFL Advisers is also relatively very bullish on the stock, designating 14.56 percent of its 13F equity portfolio to ALV.

Seeing as Autoliv Inc. (NYSE:ALV) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that slashed their positions entirely in the first quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cut the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $12.4 million in stock. Richard SchimeláandáLawrence Sapanski’s fund, Cinctive Capital Management, also said goodbye to its stock, about $4.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Autoliv Inc. (NYSE:ALV) but similarly valued. We will take a look at New Fortress Energy Inc. (NASDAQ:NFE), CAE, Inc. (NYSE:CAE), Pearson PLC (NYSE:PSO), Genpact Limited (NYSE:G), Casey’s General Stores, Inc. (NASDAQ:CASY), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks’ market caps resemble ALV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NFE 12 30553 1
CAE 17 113000 7
PSO 6 19900 1
G 23 271528 -8
CASY 11 96510 -12
RNR 30 470953 -9
KNX 25 341454 -9
Average 17.7 191985 -4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $813 million in ALV’s case. RenaissanceRe Holdings Ltd. (NYSE:RNR) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 6 bullish hedge fund positions. Autoliv Inc. (NYSE:ALV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALV is 51.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately ALV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALV were disappointed as the stock returned -2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.