Is RACE A Good Stock To Buy According To Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Ferrari N.V. (NYSE:RACE) in this article.

Is RACE a good stock to buy? Ferrari N.V. (NYSE:RACE) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 36. RACE shareholders have witnessed an increase in hedge fund interest in recent months. There were 25 hedge funds in our database with RACE holdings at the end of June. Our calculations also showed that RACE 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).

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we’re going to go over the latest hedge fund action regarding Ferrari N.V. (NYSE:RACE).

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

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in RACE over the last 21 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Ako Capital held the most valuable stake in Ferrari N.V. (NYSE:RACE), which was worth $332 million at the end of the third quarter. On the second spot was Darsana Capital Partners which amassed $220.9 million worth of shares. Third Point, D1 Capital Partners, and Melvin Capital Management 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 Alatus Capital allocated the biggest weight to Ferrari N.V. (NYSE:RACE), around 100% of its 13F portfolio. Lansing Management is also relatively very bullish on the stock, setting aside 15.87 percent of its 13F equity portfolio to RACE.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Stormborn Capital Management, managed by Elise Di Vincenzo Crumbine, assembled the largest position in Ferrari N.V. (NYSE:RACE). Stormborn Capital Management had $8.3 million invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Robert Pitts’s Steadfast Capital Management, McKinley Capital Management, and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ferrari N.V. (NYSE:RACE) but similarly valued. These stocks are Equinor ASA (NYSE:EQNR), TAL Education Group (NYSE:TAL), Spotify Technology S.A. (NYSE:SPOT), Illumina, Inc. (NASDAQ:ILMN), Atlassian Corporation Plc (NASDAQ:TEAM), Biogen Inc. (NASDAQ:BIIB), and Westpac Banking Corporation (NYSE:WBK). This group of stocks’ market values resemble RACE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EQNR 20 324305 10
TAL 41 2136912 1
SPOT 44 1641764 8
ILMN 44 1373332 3
TEAM 48 3228678 -7
BIIB 59 3236819 -4
WBK 4 25293 0
Average 37.1 1709586 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.1 hedge funds with bullish positions and the average amount invested in these stocks was $1710 million. That figure was $1322 million in RACE’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Ferrari N.V. (NYSE:RACE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RACE is 60.4. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on RACE as the stock returned 22.6% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.

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