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Hedge Funds Have Never Been Less Bullish On Adient plc (ADNT)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Adient plc (NYSE:ADNT).

Adient plc (NYSE:ADNT) investors should pay attention to a decrease in hedge fund interest recently. ADNT was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with ADNT holdings at the end of the previous quarter. Our calculations also showed that ADNT isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

ADNT_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Adient plc (NYSE:ADNT).

What have hedge funds been doing with Adient plc (NYSE:ADNT)?

Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ADNT over the last 16 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.

GREENLIGHT CAPITAL

Among these funds, Blue Harbour Group held the most valuable stake in Adient plc (NYSE:ADNT), which was worth $159 million at the end of the second quarter. On the second spot was Newtyn Management which amassed $70.9 million worth of shares. Moreover, Cyrus Capital Partners, Greenlight Capital, and Lakewood Capital Management were also bullish on Adient plc (NYSE:ADNT), allocating a large percentage of their portfolios to this stock.

Since Adient plc (NYSE:ADNT) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who were dropping their full holdings last quarter. At the top of the heap, Noah Levy and Eugene Dozortsev’s Newtyn Management sold off the largest position of all the hedgies watched by Insider Monkey, comprising an estimated $13 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $9.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Adient plc (NYSE:ADNT). These stocks are Genomic Health, Inc. (NASDAQ:GHDX), WD-40 Company (NASDAQ:WDFC), Washington Real Estate Investment Trust (NYSE:WRE), and Seaspan Corporation (NYSE:SSW). This group of stocks’ market caps are similar to ADNT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GHDX 18 880407 -7
WDFC 15 127686 1
WRE 6 102375 -3
SSW 7 780442 -2
Average 11.5 472728 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $473 million. That figure was $571 million in ADNT’s case. Genomic Health, Inc. (NASDAQ:GHDX) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 6 bullish hedge fund positions. Adient plc (NYSE:ADNT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ADNT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ADNT were disappointed as the stock returned -5.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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