2015 was a good year for the automotive sector with vehicle sales rising to record levels. However, that stunning sales growth failed to translate into a rally for automotive stocks. Despite the improvement in their financial performance, stocks of most auto heavyweights ended 2015 either flat or with a loss. Since auto stocks failed to perform well when the tide was on their side last year, some analysts are concerned whether they will be able to do so going forward when they face major headwinds like rising delinquencies and interest rates of subprime auto loans and the continuing growth of ride-sharing services such as ‘Uber’ and ‘Lyft’. Even though auto industry experts, on their part, acknowledge that the industry faces those headwinds, they also think that some of those concerns are overblown and the sector will continue to grow in the future like it had in the past century despite facing numerous headwinds. While we don’t know which side will eventually win this argument, we do know the auto stocks that were backed heavily by smart money at the end of 2015 and hence can potentially outperform their peers in the coming quarters. Therefore, in this post we will focus on the five most popular auto stocks among the over 800 hedge funds covered by us going into 2016.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 PACCAR Inc (NASDAQ:PCAR)
– Investors with Long Positions (as of December 31): 24
– Aggregate Value of Investors’ Holdings (as of December 31): $460 million
Though the shares of PACCAR Inc (NASDAQ:PCAR) suffered an over 9% decline and its ownership among funds covered by us declined by 10 during the fourth quarter, the aggregate value of their holdings in the company actually saw a net increase of $8.7 million during the same period. Billionaire Ken Griffin‘s Citadel Investment Group made a three-fold increase in its stake in the company to 971,074 shares during that period. This year, PACCAR Inc (NASDAQ:PCAR)’s stock has appreciated by over 11%, however, trading at a trailing P/E of 11.85 analysts believe that it is still undervalued. On March 24, the stock saw a sharp correction after the company revealed that in its fiscal 2016 first quarter it will set aside $945 million in provisions for costs related to the ongoing truck price-fixing probe by European regulators. Following Navistar (NYSE:NAV)’s CEO comments, on March 3, which indicated that the company is open to merger talks, there are rumors that PACCAR Inc can make a bid for Navistar.