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Is Honda Motor Co Ltd (HMC) 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 Honda Motor Co Ltd (NYSE:HMC).

Is Honda Motor Co Ltd (NYSE:HMC) worth your attention right now? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions were trimmed by 1 recently. Our calculations also showed that HMC 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 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the new hedge fund action surrounding Honda Motor Co Ltd (NYSE:HMC).

How have hedgies been trading Honda Motor Co Ltd (NYSE:HMC)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HMC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Honda Motor Co Ltd (NYSE:HMC), with a stake worth $73.9 million reported as of the end of September. Trailing Renaissance Technologies was Orbis Investment Management, which amassed a stake valued at $48.1 million. LMR Partners, Arrowstreet Capital, and Citadel Investment Group 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 LMR Partners allocated the biggest weight to Honda Motor Co Ltd (NYSE:HMC), around 1.46% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to HMC.

Due to the fact that Honda Motor Co Ltd (NYSE:HMC) has witnessed a decline in interest from the smart money, it’s safe to say that there were a few hedgies that elected to cut their full holdings last quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital sold off the biggest stake of all the hedgies tracked by Insider Monkey, worth about $1.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Honda Motor Co Ltd (NYSE:HMC) but similarly valued. We will take a look at America Movil SAB de CV (NYSE:AMX), Banco Santander (Brasil) SA (NYSE:BSBR), General Dynamics Corporation (NYSE:GD), and Aon plc (NYSE:AON). All of these stocks’ market caps are similar to HMC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMX 11 128726 -6
BSBR 8 16250 0
GD 39 5111482 -7
AON 47 2705439 -4
Average 26.25 1990474 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $1990 million. That figure was $144 million in HMC’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Honda Motor Co Ltd (NYSE:HMC) is even less popular than BSBR. 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 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on HMC, though not to the same extent, as the stock returned 21.2% during the second quarter (through June 17th) and outperformed the market as well.

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