Was The Smart Money Right About AutoNation, Inc. (AN)?

In this article we will analyze whether AutoNation, Inc. (NYSE:AN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Hedge fund interest in AutoNation, Inc. (NYSE:AN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cameco Corporation (NYSE:CCJ), Acceleron Pharma Inc (Nasdaq:XLRN), and Zhihu Inc. (NYSE:ZH) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Keeping this in mind let’s take a look at the latest hedge fund action surrounding AutoNation, Inc. (NYSE:AN).

Do Hedge Funds Think AN Is A Good Stock To Buy Now?

At second quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AN over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AN A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ricky Sandler’s Eminence Capital has the biggest position in AutoNation, Inc., worth close to $122.1 million, comprising 1.5% of its total 13F portfolio. On Eminence Capital’s heels is AQR Capital Management, led by Cliff Asness, holding a $106.1 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Edward Lampert’s ESL Investments and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position ESL Investments allocated the biggest weight to AutoNation, Inc., around 50.05% of its 13F portfolio. Eminence Capital is also relatively very bullish on the stock, earmarking 1.5 percent of its 13F equity portfolio to AN.

Judging by the fact that AutoNation, Inc. has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their positions entirely last quarter. Interestingly, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $3.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $2.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AutoNation, Inc. but similarly valued. These stocks are Cameco Corporation (NYSE:CCJ), Acceleron Pharma Inc (Nasdaq:XLRN), Zhihu Inc. (NYSE:ZH), II-VI, Inc. (Nasdaq:IIVI), Crocs, Inc. (Nasdaq:CROX), Old Republic International Corporation (NYSE:ORI), and Shift4 Payments, Inc. (NYSE:FOUR). All of these stocks’ market caps match AN’s market cap.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $642 million. That figure was $611 million in AN’s case. Acceleron Pharma Inc (Nasdaq:XLRN) is the most popular stock in this table. On the other hand Zhihu Inc. (NYSE:ZH) is the least popular one with only 10 bullish hedge fund positions. AutoNation, Inc. (NYSE:AN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AN is 46.2. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on AN as the stock returned 30.4% since the end of the second quarter (through 11/5) and outperformed the market by an even larger margin.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.