Were Hedge Funds Right About Ford Motor Company (F)?

The latest 13F reporting period has come and gone, and 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. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtFord Motor Company (NYSE:F) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Ford Motor Company (NYSE:F) undervalued? Money managers were selling. The number of bullish hedge fund bets decreased by 3 recently. Our calculations also showed that F 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 today’s marketplace there are tons of indicators stock market investors put to use to size up stocks. Some of the most underrated indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the S&P 500 by a healthy margin (see the details here).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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 take a glance at the key hedge fund action encompassing Ford Motor Company (NYSE:F).

What does smart money think about Ford Motor Company (NYSE:F)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in F a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is F A Good Stock To Buy?

Among these funds, Pzena Investment Management held the most valuable stake in Ford Motor Company (NYSE:F), which was worth $246.8 million at the end of the third quarter. On the second spot was Greenhaven Associates which amassed $165.4 million worth of shares. Arrowstreet Capital, Alkeon Capital Management, and Millennium 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 Greenhaven Associates allocated the biggest weight to Ford Motor Company (NYSE:F), around 6.15% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, dishing out 1.92 percent of its 13F equity portfolio to F.

Due to the fact that Ford Motor Company (NYSE:F) has witnessed declining sentiment from hedge fund managers, logic holds that there exists a select few fund managers that slashed their entire stakes heading into Q4. Interestingly, Renaissance Technologies said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $49.5 million in stock. Ryan Caldwell’s fund, Chiron Investment Management, also dumped its stock, about $17.1 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Ford Motor Company (NYSE:F). These stocks are PT Telekomunikasi Indonesia (NYSE:TLK), STMicroelectronics N.V. (NYSE:STM), PPL Corporation (NYSE:PPL), and Hilton Worldwide Holdings Inc (NYSE:HLT). This group of stocks’ market caps match F’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLK 7 151891 -1
STM 11 70106 -6
PPL 28 311688 -4
HLT 43 3133178 -14
Average 22.25 916716 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $917 million. That figure was $667 million in F’s case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 7 bullish hedge fund positions. Ford Motor Company (NYSE:F) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on F as the stock returned 25.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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