Were Hedge Funds Right About Aeva Technologies, Inc. (AEVA)?

·6 min read

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Aeva Technologies, Inc. (NYSE:AEVA), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Hedge fund interest in Aeva Technologies, Inc. (NYSE:AEVA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AEVA isn't among the 30 most popular stocks among hedge funds (click for Q1 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 Trinseo S.A. (NYSE:TSE), IGM Biosciences, Inc. (NASDAQ:IGMS), and Forward Air Corporation (NASDAQ:FWRD) to gather more data points.

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Alex Litowitz Magnetar Capital
Alex Litowitz Magnetar Capital

Alex Litowitz of Magnetar Capital

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. With all of this in mind let's review the latest hedge fund action encompassing Aeva Technologies, Inc. (NYSE:AEVA).

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

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in AEVA a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Sylebra Capital Management held the most valuable stake in Aeva Technologies, Inc. (NYSE:AEVA), which was worth $237.6 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $88.5 million worth of shares. Rima Senvest Management, Magnetar Capital, and Rima Senvest 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 Sylebra Capital Management allocated the biggest weight to Aeva Technologies, Inc. (NYSE:AEVA), around 6.14% of its 13F portfolio. Ionic Capital Management is also relatively very bullish on the stock, designating 0.62 percent of its 13F equity portfolio to AEVA.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Sylebra Capital Management).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Aeva Technologies, Inc. (NYSE:AEVA) but similarly valued. We will take a look at Trinseo S.A. (NYSE:TSE), IGM Biosciences, Inc. (NASDAQ:IGMS), Forward Air Corporation (NASDAQ:FWRD), Golub Capital BDC Inc (NASDAQ:GBDC), Amarin Corporation plc (NASDAQ:AMRN), Gentherm Inc (NASDAQ:THRM), and Essential Properties Realty Trust, Inc. (NYSE:EPRT). All of these stocks' market caps are closest to AEVA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSE,17,51427,1 IGMS,18,759325,0 FWRD,13,285958,2 GBDC,15,47180,0 AMRN,22,444225,-2 THRM,13,113507,0 EPRT,5,7692,-2 Average,14.7,244188,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $379 million in AEVA's case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 5 bullish hedge fund positions. Aeva Technologies, Inc. (NYSE:AEVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AEVA is 67.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 and beat the market again by 10.1 percentage points. Unfortunately AEVA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AEVA were disappointed as the stock returned -24.1% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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