Is Axalta Coating Systems Ltd (AXTA) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Axalta Coating Systems Ltd (NYSE:AXTA).

Axalta Coating Systems Ltd (NYSE:AXTA) has experienced a decrease in enthusiasm from smart money recently. AXTA was in 49 hedge funds’ portfolios at the end of March. There were 60 hedge funds in our database with AXTA holdings at the end of the previous quarter. Our calculations also showed that AXTA 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 the eyes of most traders, hedge funds are perceived as slow, old financial tools of years past. While there are more than 8000 funds with their doors open at present, We choose to focus on the bigwigs of this club, approximately 850 funds. These investment experts administer bulk of all hedge funds’ total capital, and by tailing their first-class stock picks, Insider Monkey has come up with a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Barry Rosenstein JANA PARTNERS

Barry Rosenstein of JANA Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. 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 we’re going to take a look at the key hedge fund action regarding Axalta Coating Systems Ltd (NYSE:AXTA).

Hedge fund activity in Axalta Coating Systems Ltd (NYSE:AXTA)

Heading into the second quarter of 2020, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AXTA over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Berkshire Hathaway was the largest shareholder of Axalta Coating Systems Ltd (NYSE:AXTA), with a stake worth $415.7 million reported as of the end of September. Trailing Berkshire Hathaway was Rivulet Capital, which amassed a stake valued at $120.3 million. Diamond Hill Capital, JANA Partners, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to Axalta Coating Systems Ltd (NYSE:AXTA), around 8.19% of its 13F portfolio. JANA Partners is also relatively very bullish on the stock, setting aside 7.72 percent of its 13F equity portfolio to AXTA.

Due to the fact that Axalta Coating Systems Ltd (NYSE:AXTA) has witnessed falling interest from the aggregate hedge fund industry, we can see that there was a specific group of funds who were dropping their entire stakes in the third quarter. Interestingly, Bob Peck and Andy Raab’s FPR Partners dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $72 million in stock, and Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners was right behind this move, as the fund cut about $59.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 11 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Axalta Coating Systems Ltd (NYSE:AXTA). These stocks are Eastgroup Properties Inc (NYSE:EGP), Solaredge Technologies Inc (NASDAQ:SEDG), LogMeIn Inc (NASDAQ:LOGM), and Anaplan, Inc. (NYSE:PLAN). This group of stocks’ market valuations are closest to AXTA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EGP 13 36375 3
SEDG 27 264038 -1
LOGM 28 759486 -3
PLAN 51 1608189 -6
Average 29.75 667022 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $667 million. That figure was $1106 million in AXTA’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 13 bullish hedge fund positions. Axalta Coating Systems Ltd (NYSE:AXTA) is not the most popular stock in this group but hedge fund interest is still above 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on AXTA as the stock returned 24.7% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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