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Hedge Funds Are Dumping Aptiv PLC (APTV)

In this article we will take a look at whether hedge funds think Aptiv PLC (NYSE:APTV) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Aptiv PLC (NYSE:APTV) an attractive stock to buy now? The best stock pickers are taking a pessimistic view. The number of long hedge fund positions fell by 13 in recent months. Our calculations also showed that APTV 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). APTV was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. There were 46 hedge funds in our database with APTV holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 51 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.

Alexander Roepers of Atlantic Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action regarding Aptiv PLC (NYSE:APTV).

What does smart money think about Aptiv PLC (NYSE:APTV)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APTV over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the largest position in Aptiv PLC (NYSE:APTV), worth close to $335.2 million, comprising 2.4% of its total 13F portfolio. On Generation Investment Management’s heels is Holocene Advisors, led by Brandon Haley, holding a $101.9 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Ian Simm’s Impax Asset Management, Ken Griffin’s Citadel Investment Group and Seth Wunder’s Black-and-White Capital. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Aptiv PLC (NYSE:APTV), around 3.08% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, designating 2.38 percent of its 13F equity portfolio to APTV.

Because Aptiv PLC (NYSE:APTV) has faced declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of funds that decided to sell off their full holdings last quarter. Intriguingly, Steve Cohen’s Point72 Asset Management sold off the largest position of the 750 funds watched by Insider Monkey, totaling about $21 million in stock. Neal Nathani and Darren Dinneen’s fund, Totem Point Management, also dumped its stock, about $15.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 13 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Aptiv PLC (NYSE:APTV). We will take a look at Hewlett Packard Enterprise Company (NYSE:HPE), Twilio Inc. (NYSE:TWLO), TransUnion (NYSE:TRU), and Evergy, Inc. (NYSE:EVRG). This group of stocks’ market caps match APTV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HPE 29 641977 -12
TWLO 52 1549546 -8
TRU 44 895453 7
EVRG 30 757141 5
Average 38.75 961029 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $961 million. That figure was $679 million in APTV’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Hewlett Packard Enterprise Company (NYSE:HPE) is the least popular one with only 29 bullish hedge fund positions. Aptiv PLC (NYSE:APTV) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on APTV as the stock returned 53% during the second quarter and outperformed the market by an even larger margin.

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