Is FCAU A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Fiat Chrysler Automobiles NV (NYSE:FCAU) based on that data.

Is FCAU a good stock to buy now? Fiat Chrysler Automobiles NV (NYSE:FCAU) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that FCAU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare FCAU to other stocks including Corning Incorporated (NYSE:GLW), Copart, Inc. (NASDAQ:CPRT), and RingCentral Inc (NYSE:RNG) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to analyze the latest hedge fund action encompassing Fiat Chrysler Automobiles NV (NYSE:FCAU).

Do Hedge Funds Think FCAU Is A Good Stock To Buy Now?

At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in FCAU a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FCAU A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Fiat Chrysler Automobiles NV (NYSE:FCAU), worth close to $83.4 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $45.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Quincy Lee’s Ancient Art (Teton Capital) and Guy Spier’s Aquamarine Capital Management. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE:FCAU), around 6.15% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, designating 3.06 percent of its 13F equity portfolio to FCAU.

Because Fiat Chrysler Automobiles NV (NYSE:FCAU) has faced bearish sentiment from the smart money, it’s easy to see that there were a few fund managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Javier Velazquez’s Albar Capital cut the largest stake of the 750 funds monitored by Insider Monkey, valued at about $0.8 million in stock, and Claes Fornell’s CSat Investment Advisory was right behind this move, as the fund sold off about $0.6 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fiat Chrysler Automobiles NV (NYSE:FCAU) but similarly valued. These stocks are Corning Incorporated (NYSE:GLW), Copart, Inc. (NASDAQ:CPRT), RingCentral Inc (NYSE:RNG), Credit Suisse Group AG (NYSE:CS), Skyworks Solutions Inc (NASDAQ:SWKS), China Telecom Corporation Limited (NYSE:CHA), and The Trade Desk, Inc. (NASDAQ:TTD). All of these stocks’ market caps are similar to FCAU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLW 36 346549 8
CPRT 56 1077546 -4
RNG 59 3300948 -3
CS 13 68386 -1
SWKS 50 886176 1
CHA 3 30054 -2
TTD 23 510796 3
Average 34.3 888636 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $889 million. That figure was $218 million in FCAU’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 3 bullish hedge fund positions. Fiat Chrysler Automobiles NV (NYSE:FCAU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FCAU is 36.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on FCAU as the stock returned 37.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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