Were Hedge Funds Right About Fiat Chrysler Automobiles (FCAU)?

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. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Fiat Chrysler Automobiles NV (NYSE:FCAU).

Fiat Chrysler Automobiles NV (NYSE:FCAU) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. FCAU was in 23 hedge funds’ portfolios at the end of December. There were 28 hedge funds in our database with FCAU positions at the end of the previous quarter. Our calculations also showed that FCAU 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).


Mohnish Pabrai of Mohnish Pabrai

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. With all of this in mind we’re going to check out the recent hedge fund action surrounding Fiat Chrysler Automobiles NV (NYSE:FCAU).

How have hedgies been trading Fiat Chrysler Automobiles NV (NYSE:FCAU)?

At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in FCAU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Fiat Chrysler Automobiles NV (NYSE:FCAU), with a stake worth $322.7 million reported as of the end of September. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $210.8 million. Mohnish Pabrai, Renaissance Technologies, 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 Mohnish Pabrai allocated the biggest weight to Fiat Chrysler Automobiles NV (NYSE:FCAU), around 44.69% of its 13F portfolio. Aquamarine Capital Management is also relatively very bullish on the stock, setting aside 13.62 percent of its 13F equity portfolio to FCAU.

Since Fiat Chrysler Automobiles NV (NYSE:FCAU) has experienced falling interest from the smart money, it’s easy to see that there exists a select few funds who were dropping their entire stakes in the third quarter. At the top of the heap, Chase Coleman’s Tiger Global Management LLC dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $973.5 million in stock. Jay Petschek and Steven Major’s fund, Corsair Capital Management, also said goodbye to its stock, about $1.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.

Let’s also examine 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 Match Group, Inc. (NASDAQ:MTCH), Fox Corporation (NASDAQ:FOXA), Snap Inc. (NYSE:SNAP), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks’ market values are similar to FCAU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTCH 32 1073084 -12
FOXA 37 2451723 -14
SNAP 66 2388937 12
LBRDK 46 4094159 2
Average 45.25 2501976 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.25 hedge funds with bullish positions and the average amount invested in these stocks was $2502 million. That figure was $971 million in FCAU’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Match Group, Inc. (NASDAQ:MTCH) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Fiat Chrysler Automobiles NV (NYSE:FCAU) is even less popular than MTCH. Hedge funds dodged a bullet by taking a bearish stance towards FCAU. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 12.9 percentage points. Unfortunately FCAU wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FCAU investors were disappointed as the stock returned -37.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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.