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Hedge Funds Are Coming Back To Autoliv Inc. (ALV)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Autoliv Inc. (NYSE:ALV) and determine whether the smart money was really smart about this stock.

Is Autoliv Inc. (NYSE:ALV) a buy here? Prominent investors were betting on the stock. The number of bullish hedge fund positions advanced by 7 in recent months. Autoliv Inc. (NYSE:ALV) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ALV isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Steven Cohen

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a peek at the latest hedge fund action regarding Autoliv Inc. (NYSE:ALV).

How are hedge funds trading Autoliv Inc. (NYSE:ALV)?

At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 47% from the first quarter of 2020. On the other hand, there were a total of 13 hedge funds with a bullish position in ALV a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is ALV A Good Stock To Buy?

More specifically, Cevian Capital was the largest shareholder of Autoliv Inc. (NYSE:ALV), with a stake worth $369.2 million reported as of the end of September. Trailing Cevian Capital was Holocene Advisors, which amassed a stake valued at $108.7 million. LFL Advisers, Renaissance Technologies, and 13D Management 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 Cevian Capital allocated the biggest weight to Autoliv Inc. (NYSE:ALV), around 81.15% of its 13F portfolio. LFL Advisers is also relatively very bullish on the stock, setting aside 11.52 percent of its 13F equity portfolio to ALV.

As industrywide interest jumped, some big names have jumped into Autoliv Inc. (NYSE:ALV) headfirst. Greenhaven Associates, managed by Edgar Wachenheim, initiated the most outsized position in Autoliv Inc. (NYSE:ALV). Greenhaven Associates had $4.8 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $3.7 million investment in the stock during the quarter. The following funds were also among the new ALV investors: Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks similar to Autoliv Inc. (NYSE:ALV). These stocks are HD Supply Holdings Inc (NASDAQ:HDS), Apartment Investment and Management Co. (NYSE:AIV), AppFolio Inc (NASDAQ:APPF), Zions Bancorporation, National Association (NASDAQ:ZION), Ingredion Incorporated (NYSE:INGR), Kimco Realty Corp (NYSE:KIM), and Teck Resources Ltd (NYSE:TECK). 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
HDS 44 992771 4
AIV 24 488634 3
APPF 21 400415 2
ZION 24 66065 -9
INGR 22 226529 4
KIM 28 171160 6
TECK 25 329603 1
Average 26.9 382168 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $543 million in ALV’s case. HD Supply Holdings Inc (NASDAQ:HDS) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 21 bullish hedge fund positions. Autoliv Inc. (NYSE:ALV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALV is 42.2. 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. 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 gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on ALV as the stock returned 13% in the third quarter and outperformed the market by an even larger margin.

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