Is Toyota Motor Corporation (NYSE:TM) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Toyota Motor Corporation (NYSE:TM) was in 10 hedge funds' portfolios at the end of March. TM has seen an increase in activity from the world's largest hedge funds of late. There were 8 hedge funds in our database with TM positions at the end of the previous quarter. Our calculations also showed that tm isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a gander at the fresh hedge fund action encompassing Toyota Motor Corporation (NYSE:TM).
What does smart money think about Toyota Motor Corporation (NYSE:TM)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in TM over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
No of Hedge Funds with TM Positions
Among these funds, Renaissance Technologies held the most valuable stake in Toyota Motor Corporation (NYSE:TM), which was worth $101.4 million at the end of the first quarter. On the second spot was Adage Capital Management which amassed $43 million worth of shares. Moreover, Millennium Management, D E Shaw, and PEAK6 Capital Management were also bullish on Toyota Motor Corporation (NYSE:TM), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most valuable position in Toyota Motor Corporation (NYSE:TM). Millennium Management had $7.7 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $0.9 million position during the quarter. The following funds were also among the new TM investors: Michael Gelband's ExodusPoint Capital, Matthew Tewksbury's Stevens Capital Management, and Mario Gabelli's GAMCO Investors.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Toyota Motor Corporation (NYSE:TM) but similarly valued. We will take a look at Anheuser-Busch InBev SA/NV (NYSE:BUD), HSBC Holdings plc (NYSE:HSBC), Netflix, Inc. (NASDAQ:NFLX), and Unilever N.V. (NYSE:UN). This group of stocks' market caps are similar to TM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BUD,22,1493242,1 HSBC,12,1080398,1 NFLX,96,9396182,13 UN,19,1413959,4 Average,37.25,3345945,4.75 [/table]
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $3346 million. That figure was $161 million in TM's case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (NYSE:TM) is even less popular than HSBC. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on TM, though not to the same extent, as the stock returned 6.1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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