In this article we are going to use hedge fund sentiment as a tool and determine whether Toyota Motor Corporation (NYSE:TM) is a good investment right now. We like to analyze hedge fund sentiment before conducting 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 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TM has seen an increase in hedge fund interest recently. There were 11 hedge funds in our database with TM positions at the end of the fourth quarter. Our calculations also showed that TM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the 21st century investor’s toolkit there are a large number of tools stock market investors employ to value their stock investments. A couple of the most useful tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the market by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Bruce Kovner, Caxton Associates LP
Bruce Kovner of Caxton Associates LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a look at the new hedge fund action regarding Toyota Motor Corporation (NYSE:TM).
Do Hedge Funds Think TM Is A Good Stock To Buy Now?
At first quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 64% from the fourth quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in TM a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Is TM A Good Stock To Buy?
According to Insider Monkey's hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Toyota Motor Corporation (NYSE:TM). Fisher Asset Management has a $693.4 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is PEAK6 Capital Management, led by Matthew Hulsizer, holding a $48.2 million call position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of Ari Zweiman's 683 Capital Partners, D. E. Shaw's D E Shaw and Renaissance Technologies. In terms of the portfolio weights assigned to each position 683 Capital Partners allocated the biggest weight to Toyota Motor Corporation (NYSE:TM), around 2.48% of its 13F portfolio. Ovata Capital Management is also relatively very bullish on the stock, dishing out 1.94 percent of its 13F equity portfolio to TM.
Consequently, specific money managers have jumped into Toyota Motor Corporation (NYSE:TM) headfirst. 683 Capital Partners, managed by Ari Zweiman, created the largest call position in Toyota Motor Corporation (NYSE:TM). 683 Capital Partners had $46.8 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also initiated a $9.2 million position during the quarter. The other funds with brand new TM positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management, and James Chen's Ovata Capital Management.
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. These stocks are AT&T Inc. (NYSE:T), Abbott Laboratories (NYSE:ABT), NIKE, Inc. (NYSE:NKE), Oracle Corporation (NASDAQ:ORCL), Pfizer Inc. (NYSE:PFE), Chevron Corporation (NYSE:CVX), and PepsiCo, Inc. (NYSE:PEP). All of these 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 T,63,2701777,5 ABT,65,5136552,1 NKE,78,5176711,-4 ORCL,52,2888444,0 PFE,65,2014186,2 CVX,41,4866758,-9 PEP,61,4882404,5 Average,60.7,3952405,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 60.7 hedge funds with bullish positions and the average amount invested in these stocks was $3952 million. That figure was $824 million in TM's case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks Toyota Motor Corporation (NYSE:TM) is even less popular than CVX. Our overall hedge fund sentiment score for TM is 40. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd but managed to beat the market by 10.1 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 15.2% since the end of March (through July 23rd) and outperformed the market as well.
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