Is AU Optronics Corp (ADR) (AUO) Going to Burn These Hedge Funds?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in AU Optronics Corp (ADR) (NYSE:AUO).

AU Optronics Corp (ADR) (NYSE:AUO) shareholders have witnessed a decrease in hedge fund interest recently. There were 15 hedge funds in our database with AUO holdings at the end of the previous quarter. At the end of this article we will also compare AUO to other stocks including First Citizens BancShares Inc. (NASDAQ:FCNCA), Telecom Argentina S.A. (ADR) (NYSE:TEO), and Webster Financial Corporation (NYSE:WBS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s analyze the key action surrounding AU Optronics Corp (ADR) (NYSE:AUO).

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

Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 33% from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in AUO at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the largest position in AU Optronics Corp (ADR) (NYSE:AUO). Renaissance Technologies has a $21.8 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $14.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Thomas E. Claugus’ GMT Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since AU Optronics Corp (ADR) (NYSE:AUO) has witnessed a falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds that elected to cut their full holdings last quarter. At the top of the heap, Principal Global Investors’ Columbus Circle Investors said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $1.7 million in stock, and Leon Shaulov’s Maplelane Capital was right behind this move, as the fund dropped about $1.4 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to AU Optronics Corp (ADR) (NYSE:AUO). We will take a look at First Citizens BancShares Inc. (NASDAQ:FCNCA), Telecom Argentina S.A. (ADR) (NYSE:TEO), Webster Financial Corporation (NYSE:WBS), and Tallgrass Energy Partners LP (NYSE:TEP). All of these stocks’ market caps resemble AUO’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $57 million in AUO’s case. Webster Financial Corporation (NYSE:WBS) is the most popular stock in this table. On the other hand Tallgrass Energy Partners LP(NYSE:TEP) is the least popular one with only 5 bullish hedge fund positions. AU Optronics Corp (ADR) (NYSE:AUO) 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. In this regard WBS might be a better candidate to consider taking a long position in.

Disclosure: None