Were Hedge Funds Right About Ferrari N.V. (RACE)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Ferrari N.V. (NYSE:RACE).

Ferrari N.V. (NYSE:RACE) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that RACE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the new hedge fund action encompassing Ferrari N.V. (NYSE:RACE).

Hedge fund activity in Ferrari N.V. (NYSE:RACE)

At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RACE over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D1 Capital Partners was the largest shareholder of Ferrari N.V. (NYSE:RACE), with a stake worth $423.4 million reported as of the end of September. Trailing D1 Capital Partners was Ako Capital, which amassed a stake valued at $406.5 million. Darsana Capital Partners, Melvin Capital Management, and Marshall Wace LLP 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 49.77% of its 13F portfolio. Aquamarine Capital Management is also relatively very bullish on the stock, designating 15.27 percent of its 13F equity portfolio to RACE.

Consequently, specific money managers have been driving this bullishness. Ako Capital, managed by Nicolai Tangen, established the biggest position in Ferrari N.V. (NYSE:RACE). Ako Capital had $406.5 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also made a $24.8 million investment in the stock during the quarter. The following funds were also among the new RACE investors: Israel Englander’s Millennium Management, Guy Shahar’s DSAM Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks similar to Ferrari N.V. (NYSE:RACE). We will take a look at Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Barclays PLC (NYSE:BCS), Ecopetrol S.A. (NYSE:EC), and Keurig Dr Pepper Inc. (NYSE:KDP). This group of stocks’ market caps are similar to RACE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REGN 37 931314 2
BCS 11 115501 -4
EC 11 229258 1
KDP 26 593887 3
Average 21.25 467490 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $2004 million in RACE’s case. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 11 bullish hedge fund positions. Ferrari N.V. (NYSE:RACE) 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on RACE, though not to the same extent, as the stock returned -9.4% during the first four months of 2020 (through May 1st) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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