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Best Automotive Stocks For 2020 According To Hedge Funds

What are the best automotive stocks for 2020? The automotive industry is hugely visible and has generally attracted considerable interest from investors for decades. However, these stocks are also cyclical in nature, as they tend to advance or decline with the prevalent economic tide. When there is uncertainty or fear about the economy, automotive companies’ are hugely affected because consumers postpone buying new vehicles in such situations. High fixed costs resulting from operating factories, research and development, tooling, logistics networks, and labor contracts imply that automakers need to have a steady stream of competitive new products to whether the storm to post profit margins even when the economy has a good run.

The growing acceptance of electric vehicles is also a game-changer in the automotive industry. They are new and different, and most industry watchers expect them to largely displace internal-combustion vehicles over time due to the positive implications they have for the environment. Already, we are witnessing this disruptive tendency in the movement of EV stocks in the market. Traditional automakers are also introducing electric vehicles of their own, and competition in this segment of the market is expected to be fierce over time.

Tesla

So how does one dumb the market noises and pick the best available automotive stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You probably have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had large positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here.

Using the hedge fund filings for Q4 of 2019 and Q1 of 2020 we were able to identify the best automotive stocks for 2020. They are listed below.

8. Honda Motor Co Ltd (NYSE: HMC)

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in Honda Motor Co Ltd (NYSE:HMC). This indicates a change of -11% from 2019 Q4. Honda shares lost nearly 8% this year and underperformed the market. A select group of notable hedge fund managers have been accumulating large positions in this stock. Renaissance Technologies, Orbis Investment Management, LMR Partners, Arrowstreet Capital, and Citadel Investment Group are long on this stock.

In terms of the portfolio weights assigned to each position, LMR Partners allocated the biggest weight to Honda Motor Co Ltd (NYSE: HMC), around 1.46% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to HMC.

7. Toyota Motors (NYSE:TM)

Toyota Motors (NYSE:TM) like most of its counterparts in the automotive sector may not have had a great year, but a lot of people still belive that this is a stock to pass on to your grandkids. Some have even argued that Toyota Motors (NYSE:TM) is more valuable than Tesla, even though the latter has a higher share price. Fund managers such as Renaissance Technologies, its largest shareholder (as of the end of September) with a stake worth $139.5 million are bullish on the stock. Others are Adage Capital Management, Orbis Investment Management, Citadel Investment Group, and PEAK6 Capital Management.

In terms of the portfolio weights assigned to each position Adage Capital Management allocated the biggest weight to Toyota Motor Corporation (NYSE:TM), around 0.14% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to TM.

Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. Toyota Motors (NYSE:TM) were disappointed as the stock lost 9% this year and underperformed the market.

6. NIO Inc. (NYSE: NIO)

Though NIO Inc. (NYSE: NIO) has returned 205% year-to-date and outperformed the market, it isn’t trendy among hedgies. The stock which many see as a shadow that trails Tesla isn’t among the 30 most popular stocks among hedge funds.

NIO Inc. (NYSE: NIO) was in 16 hedge funds’ portfolios at the end of the first quarter of 2020, a position that has remained unchanged presently. The largest stake in NIO was held by Citadel Investment Group, which reported holding $8.3 million worth of stock (at the end of September 2019). This is followed by Citadel Investment Group with a $6.8 million position. Other investors bullish on the company included Millennium Management, HBK Investments, and Laurion Capital Management.

In terms of the portfolio weights assigned to each position, Oasis Management allocated the biggest weight to NIO Inc. (NYSE: NIO), around 3.22% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to NIO.

5. Fiat Chrysler Automobiles NV (NYSE: FCAU)

While other automotive tickers have seen a reduction in the number of fund managers position, Fiat Chrysler’s (NYSE: FCAU) experience has taken a contrasting turn, indicating an optimistic view. Heading into Q2 of 2020, a total of 25 hedge funds tracked by Insider Monkey were bullish on this stock. This figure represents a change of 9% from Q4 2019. There are quite a number of Hedge fund managers that are bullish on Fiat Chrysler (NYSE: FCAU). Arrowstreet Capital, with a reported stock worth of $170 million (as at the end of September 2019), has the most substantial stake in Fiat Chrysler (NYSE: FCAU). Two Sigma Advisors comes in second with a $71.5 million position. Other bullish investors are Segantii Capital, Renaissance Technologies, and Aquamarine Capital Management.

In terms of the portfolio weights assigned to each position, Aquamarine Capital Management allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE: FCAU), around 8.9% of its 13F portfolio. Mohnish Pabrai is also relatively bullish on the stock, dishing out 6.05 percent of its 13F equity portfolio to FCAU.

Hedge fund managers that were long on the stock were rewarded for their foresight as the stock returned 56% in the second quarter and outperformed the market by an even more significant margin. Unfortunately FCAU shares lost 19% so far this year and underperformed the market.

4. Ferrari N.V. (NYSE:RACE)

Ferrari N.V. (NYSE: RACE) has witnessed a decrease in support from smart money recently. There were 36 hedge funds with RACE positions at the end of 2019 Q4. This figure reduced to 29 at the end of the 2020 Q1. Institutional investors such as Nicolai Tangen’s Ako Capital, Daniel Sundheim of D1 Capital Partners, Anand Desai’s Darsana Capital Partners, Dan Loeb’s Third Point, and Gabriel Plotkin’s Melvin Capital Management have been bullish on this stock.

Ferrari investors fared better than most investors this year as the stock gained nearly 9% and outperformed the market by 8 percentage points.

3. Ford Motors (NYSE: F)

At the end of the 2020 Q1, 33 of the hedge funds tracked by Insider Monkey were long this stock. Institutional investors such as Pzena Investment Management, Greenhaven Associates, Arrowstreet Capital, and Alkeon Capital Management, have been long on the stock. Though Ford Motor Company (NYSE: F) is not the most popular among hedge funds, interest in this stock is still above average, with very few fund managers slashing their entire stakes. With capital changing hands, a few notable hedge fund managers such as Millennium Management and Stamos Capital have increased their stakes considerably, accumulating large positions. They were right on their bets as the stock returned 25.9% in 2020 Q2 and outperformed the market. 

2. General Motors (NYSE: GM)

Like Ford Motors (NYSE: F), smart money sentiment on General Motors Company (NYSE: GM) is getting less bullish, but majority still prefer to maintain their positions. According to research conducted by Insider Monkey, the number of long hedge fund positions on the stock was trimmed down to by 22 to 53 in 2020 Q1 as against 75 in 2019 Q4, indicating a change of -29% from the previous quarter. Fund managers such as David Einhorn’s Greenlight Capital sold off the biggest stake valued about $225.3 million in stock, while Doug Silverman and Alexander Klabin’s Senator Investment Group dropped about $91.5 million worth of stock.

General Motors shares lost more than 27% so far in 2020 and disappointed its investors.

1. TESLA Inc (NASDAQ:TSLA).

Tesla is the number one automotive stock among hedge funds.

Despite having more short sellers than any other U.S. stock, Tesla’s meteoric rise has baffled many on Wall Street. The stock has risen over 252% year-to-date, forcing many analysts to have second thoughts on the validity of their technical analyses and question whether the stock’s value matches the fundamentals.  However, some hedge fund managers had the foresight to bet on the stock before its astronomical surge this year. Fund managers such as Coatue Management, Darsana Capital Partners, ARK Investment Management, Hillhouse Capital Management, and Paloma Partners took strong bullish positions in the stock last year.  At 2020 Q1’s end, a total of 61 of the hedge funds tracked by Insider Monkey indicated bullish sentiment on (NASDAQ: TSLA), a 20% change from 2019 Q4.

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