Is Axalta Coating Systems Ltd (NYSE:AXTA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Axalta Coating Systems Ltd (NYSE:AXTA) undervalued? The best stock pickers are in a bullish mood. The number of long hedge fund positions advanced by 15 recently. Our calculations also showed that AXTA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AXTA was in 56 hedge funds' portfolios at the end of September. There were 41 hedge funds in our database with AXTA positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Kevin Oram of Praesidium Investment Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the key hedge fund action surrounding Axalta Coating Systems Ltd (NYSE:AXTA).
What does smart money think about Axalta Coating Systems Ltd (NYSE:AXTA)?
At the end of the third quarter, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 37% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AXTA over the last 17 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
AXTA_nov2019
Of the funds tracked by Insider Monkey, Warren Buffett's Berkshire Hathaway has the biggest position in Axalta Coating Systems Ltd (NYSE:AXTA), worth close to $731.6 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Ric Dillon of Diamond Hill Capital, with a $239.9 million position; 1.3% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish contain Renaissance Technologies, Bob Peck and Andy Raab's FPR Partners and Kevin Oram and Peter Uddo's Praesidium Investment Management. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Axalta Coating Systems Ltd (NYSE:AXTA), around 9.72% of its portfolio. Albar Capital is also relatively very bullish on the stock, dishing out 9.33 percent of its 13F equity portfolio to AXTA.
Now, some big names have jumped into Axalta Coating Systems Ltd (NYSE:AXTA) headfirst. TOMS Capital, managed by Benjamin Pass, created the biggest position in Axalta Coating Systems Ltd (NYSE:AXTA). TOMS Capital had $39.9 million invested in the company at the end of the quarter. Zach Schreiber's Point State Capital also initiated a $38.2 million position during the quarter. The following funds were also among the new AXTA investors: Carl Tiedemann and Michael Tiedemann's TIG Advisors, Dmitry Balyasny's Balyasny Asset Management, and Anand Parekh's Alyeska Investment Group.
Let's check out hedge fund activity in other stocks similar to Axalta Coating Systems Ltd (NYSE:AXTA). We will take a look at Gentex Corporation (NASDAQ:GNTX), Five Below Inc (NASDAQ:FIVE), Hexcel Corporation (NYSE:HXL), and Alteryx, Inc. (NYSE:AYX). This group of stocks' market valuations are similar to AXTA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNTX,28,468671,5 FIVE,34,469205,-4 HXL,26,122315,3 AYX,44,1334248,6 Average,33,598610,2.5 [/table]
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $2299 million in AXTA's case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Hexcel Corporation (NYSE:HXL) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Axalta Coating Systems Ltd (NYSE:AXTA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AXTA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AXTA were disappointed as the stock returned -5.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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