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Did Hedge Funds Make The Right Call On American Axle & Manufacturing Holdings, Inc. (AXL) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) based on that data and determine whether they were really smart about the stock.

American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. AXL has seen a decrease in hedge fund interest lately. There were 23 hedge funds in our database with AXL positions at the end of the previous quarter. Our calculations also showed that AXL 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Anchorage Capital 2014 Q2 Investor Letter

Kevin Michael Ulrich of Anchorage Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to take a look at the new hedge fund action regarding American Axle & Manufacturing Holdings, Inc. (NYSE:AXL).

What does smart money think about American Axle & Manufacturing Holdings, Inc. (NYSE:AXL)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AXL over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), which was worth $10.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $4.9 million worth of shares. Whitebox Advisors, Redwood Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Redwood Capital Management allocated the biggest weight to American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), around 0.74% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.66 percent of its 13F equity portfolio to AXL.

Because American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of funds that decided to sell off their entire stakes in the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising close to $11.3 million in stock. Richard SchimeláandáLawrence Sapanski’s fund, Cinctive Capital Management, also cut its stock, about $4.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) but similarly valued. We will take a look at Bank of Marin Bancorp (NASDAQ:BMRC), Banc of California, Inc. (NYSE:BANC), Crescent Point Energy Corp (NYSE:CPG), and Green Brick Partners Inc (NASDAQ:GRBK). This group of stocks’ market values are closest to AXL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMRC 6 13433 0
BANC 10 32635 -4
CPG 10 11861 -4
GRBK 19 228386 2
Average 11.25 71579 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $44 million in AXL’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Bank of Marin Bancorp (NASDAQ:BMRC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on AXL as the stock returned 110.5% in Q2 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.

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