Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Toyota Motor Corporation (ADR) (NYSE:TM) to find out whether it was one of their high conviction long-term ideas.
Toyota Motor Corporation (ADR) shareholders have witnessed an increase in hedge fund sentiment recently. TM was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. There were 11 hedge funds in our database with TM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Verizon Communications Inc. (NYSE:VZ), The Coca-Cola Company (NYSE:KO), and The Walt Disney Company (NYSE:DIS) to gather more data points.
In today’s marketplace there are a large number of signals stock market investors have at their disposal to evaluate publicly traded companies. Two of the most underrated signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite fund managers can outpace the broader indices by a healthy margin (see the details here).
With all of this in mind, we’re going to take a look at the new action regarding Toyota Motor Corporation (ADR) (NYSE:TM).
What does the smart money think about Toyota Motor Corporation (ADR) (NYSE:TM)?
At the Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a growth of 18% on the quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Phill Gross and Robert Atchinson’s Adage Capital Management has the largest position in Toyota Motor Corporation (ADR) (NYSE:TM), worth close to $114.5 million, corresponding to 0.3% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $64.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Ken Fisher’s Fisher Asset Management, Jim Chanos’ Kynikos and Ken Griffin’s Citadel Investment Group.
As aggregate interest increased, specific money managers have jumped into Toyota Motor Corporation (ADR) (NYSE:TM) headfirst. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, initiated the biggest position in Toyota Motor Corporation (ADR) (NYSE:TM). BlueCrest Capital Mgmt. had $3.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.8 million investment in the stock during the quarter. The only other fund with a brand new TM position is Kynikos.
Let’s now take a look at hedge fund activity in other stocks similar to Toyota Motor Corporation (ADR) (NYSE:TM). These stocks are Verizon Communications Inc. (NYSE:VZ), The Coca-Cola Company (NYSE:KO), The Walt Disney Company (NYSE:DIS), and Anheuser-Busch InBev NV (ADR) (NYSE:BUD). All of these stocks’ market caps resemble TM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $7.64 billion, considerably higher than the $230 million figure in TM’s case. Verizon Communications Inc. (NYSE:VZ) is the most popular stock in this table. On the other hand The Walt Disney Company (NYSE:DIS) is the least popular one with only 48 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (ADR) (NYSE:TM) is even less popular than DIS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.