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Hedge Funds Cashing Out Of AutoNation, Inc. (AN)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of AutoNation, Inc. (NYSE:AN).

Is AutoNation, Inc. (NYSE:AN) the right investment to pursue these days? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets decreased by 4 lately. Our calculations also showed that AN 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.

In today’s marketplace there are tons of tools investors put to use to analyze publicly traded companies. A pair of the most innovative tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top investment managers can outpace their index-focused peers by a superb amount (see the details here).

ESL INVESTMENTS

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 check out the fresh hedge fund action regarding AutoNation, Inc. (NYSE:AN).

How are hedge funds trading AutoNation, Inc. (NYSE:AN)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in AN a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is AN A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Arlington Value Capital, managed by Allan Mecham, holds the largest position in AutoNation, Inc. (NYSE:AN). Arlington Value Capital has a $64.8 million position in the stock, comprising 9.4% of its 13F portfolio. The second most bullish fund manager is ESL Investments, led by Edward Lampert, holding a $63.1 million position; the fund has 68.2% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Cliff Asness’s AQR Capital Management, Ricky Sandler’s Eminence Capital and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position ESL Investments allocated the biggest weight to AutoNation, Inc. (NYSE:AN), around 68.2% of its 13F portfolio. Arlington Value Capital is also relatively very bullish on the stock, setting aside 9.42 percent of its 13F equity portfolio to AN.

Because AutoNation, Inc. (NYSE:AN) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that decided to sell off their full holdings by the end of the first quarter. Interestingly,  Renaissance Technologies sold off the largest investment of all the hedgies followed by Insider Monkey, comprising about $10.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $7.4 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AutoNation, Inc. (NYSE:AN) but similarly valued. We will take a look at Avnet, Inc. (NYSE:AVT), Werner Enterprises, Inc. (NASDAQ:WERN), Cenovus Energy Inc (NYSE:CVE), and Companhia Energetica Minas Gerais (NYSE:CIG). This group of stocks’ market caps are closest to AN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVT 24 453381 -9
WERN 17 161749 -4
CVE 24 102988 -7
CIG 10 20207 1
Average 18.75 184581 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $256 million in AN’s case. Avnet, Inc. (NYSE:AVT) is the most popular stock in this table. On the other hand Companhia Energetica Minas Gerais (NYSE:CIG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks AutoNation, Inc. (NYSE:AN) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on AN as the stock returned 40.7% so far in Q2 (through the end of May) 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.