Were Hedge Funds Right About Axalta Coating Systems Ltd (AXTA)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 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 September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Axalta Coating Systems Ltd (NYSE:AXTA) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Is Axalta Coating Systems Ltd (NYSE:AXTA) a bargain? Money managers were taking a pessimistic view. The number of bullish hedge fund bets decreased by 10 lately. Axalta Coating Systems Ltd (NYSE:AXTA) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 60. Our calculations also showed that AXTA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 47 hedge funds in our database with AXTA positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s check out the new hedge fund action surrounding Axalta Coating Systems Ltd (NYSE:AXTA).

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

At third quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in AXTA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Axalta Coating Systems Ltd (NYSE:AXTA) was held by Rivulet Capital, which reported holding $189.9 million worth of stock at the end of September. It was followed by Ariel Investments with a $167.9 million position. Other investors bullish on the company included Gates Capital Management, Citadel Investment Group, and Lakewood Capital Management. In terms of the portfolio weights assigned to each position Rivulet Capital allocated the biggest weight to Axalta Coating Systems Ltd (NYSE:AXTA), around 9.91% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, dishing out 5.95 percent of its 13F equity portfolio to AXTA.

Because Axalta Coating Systems Ltd (NYSE:AXTA) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Parag Vora’s HG Vora Capital Management dropped the biggest position of all the hedgies followed by Insider Monkey, totaling about $53.4 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund dumped about $20.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 10 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Axalta Coating Systems Ltd (NYSE:AXTA) but similarly valued. We will take a look at Celsius Holdings, Inc. (NASDAQ:CELH), Kornit Digital Ltd. (NASDAQ:KRNT), Sportradar Group AG (NASDAQ:SRAD), Fiverr International Ltd. (NYSE:FVRR), AngloGold Ashanti Limited (NYSE:AU), Exelixis, Inc. (NASDAQ:EXEL), and Beyond Meat, Inc. (NASDAQ:BYND). This group of stocks’ market valuations are closest to AXTA’s market valuation.

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As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $1049 million in AXTA’s case. Sportradar Group AG (NASDAQ:SRAD) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Axalta Coating Systems Ltd (NYSE:AXTA) is more popular among hedge funds. Our overall hedge fund sentiment score for AXTA is 63.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on AXTA as the stock returned 1.4% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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