Is AU Optronics Corp. (ADR) (AUO) A Good Stock To Buy?

Is AU Optronics Corp. (ADR) (NYSE:AUO) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

AU Optronics Corp. (ADR) (NYSE:AUO) shareholders have witnessed a decrease in enthusiasm from smart money of late. AUO was in 6 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with AUO positions at the end of the previous quarter. At the end of this article we will also compare AUO to other stocks including NorthStar Asset Management Group Inc (NYSE:NSAM), J.C. Penney Company, Inc. (NYSE:JCP), and Lithia Motors Inc (NYSE:LAD) to get a better sense of its popularity.

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With all of this in mind, we’re going to go over the recent action encompassing AU Optronics Corp. (ADR) (NYSE:AUO).

How are hedge funds trading AU Optronics Corp. (ADR) (NYSE:AUO)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the largest position in AU Optronics Corp. (ADR) (NYSE:AUO), worth close to $11.9 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $1.3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Joel Greenblatt’s Gotham Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Seeing as AU Optronics Corp. (ADR) (NYSE:AUO) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who sold off their entire stakes last quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $0.6 million in stock. Thomas Bailard’s fund, Bailard Inc, also cut its stock, about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to AU Optronics Corp. (ADR) (NYSE:AUO). We will take a look at NorthStar Asset Management Group Inc (NYSE:NSAM), J.C. Penney Company, Inc. (NYSE:JCP), Lithia Motors Inc (NYSE:LAD), and BWX Technologies Inc (NYSE:BWXT). This group of stocks’ market values are closest to AUO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSAM 56 1373880 -7
JCP 35 423832 4
LAD 23 293597 2
BWXT 26 506212 12

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $14 million in AUO’s case. NorthStar Asset Management Group Inc (NYSE:NSAM) is the most popular stock in this table. On the other hand Lithia Motors Inc (NYSE:LAD) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks AU Optronics Corp. (ADR) (NYSE:AUO) is even less popular than LAD. 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.