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The average automobile industry stock, as represented by the Global X Auto ETF (VROM), is up over 20% YTD. The improving economy and easing financing has bolstered growth in this sector. Furthermore, there is a resurgence of sorts in domestic automobile manufacturing, aided by strength in local markets, as well as rising exports.

In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the auto group companies that are being accumulated and those being distributed by the world's largest fund managers, managing between $50 billion and over $700 billion in 13-F assets. Taken together, these mega fund managers control over 35% of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Also, taken together, they are bullish on the group, adding $1.46 billion in Q4 to their $110.92 billion prior quarter position.

The following are high-dividend yield auto group companies that these mega fund managers are most bullish about, and that are also trading at a discount to the peers in their group (see Table):

Ford Motor (F): Ford manufactures automobiles under the Ford and Lincoln nameplates, offers a wide range of after-sales vehicle services and products, and also offers vehicle financing, leasing and insurance services. Mega funds together added a net $200 million in Q4 to their $11.88 billion prior quarter position in the company, and taken together, mega funds hold 26.3% of the outstanding shares. The top buyers were Bank of America (NYSE:BAC) ($328 million) and Capital Research Global Investors ($244 million), and the top holders were Vanguard Group ($1.75 billion), State Street Corp. ($1.59 billion) and Wellington Management ($1.51 billion).

With a cheap valuation, attractive dividend yield and strong domestic sales growth bolstered by an improving economy and easing financing terms, the stars seem lined up for Ford going forward. The stock has been consolidating in a narrow 9% range over the last twelve weeks, after a sharp 30% rise near the start of the year. Ford's shares trade at a current 6.2 P/E (on a TTM basis) and 3.1 P/B, compared with averages of 24.3 and 4.2 for its peers in the domestic auto group, and shares sport an attractive dividend yield of 1.7% compared to the 0.5% average for Ford's peers.

Cummins Inc. (CMI): CMI manufactures diesel and natural gas engines, electric power generation systems and engine-related component products for OEMs worldwide. Mega funds together added a net $58 million in Q4 to their $10.04 billion prior quarter position in the company, and taken together, mega funds hold 44.7% of the outstanding shares. The top buyer was Fidelity Investments ($221 million), and the top holders were State Street Corp. ($1.55 billion), Fidelity ($1.46 billion) and Capital World Investors ($1.36 billion). CMI reported a strong Q4 on February 2nd, handily beating analyst revenue and earnings estimates. Its shares currently trade at 9-10 forward P/E and 4.0 P/B compared to averages of 10.5 and 4.1 for its peers in the internal-combustion engines group, and Cummins sports an attractive 1.4% dividend yield compared to the 0.6% average for its peers.

Dana Holding Corp. (DAN): DAN is a manufacturer of modules, axles, chassis, suspension and drive-shafts for automotive OEMs. Mega funds together added a net $46 million in Q4 to their $726 million prior quarter position in the company, and taken together, mega funds hold 36.3% of the outstanding shares. The top buyer was Wellington Management ($78 million), and the top holders were Wellington ($126 million), Bank of New York Mellon Corp. (NYSE:BNY) ($105 million) and Vanguard Group ($103 million). In its Q4 reported in February, DAN beat analyst earnings estimates (42 cents vs. 38 cents) and reported revenues in-line, while reaffirming FY 2012 guidance. Dana's shares currently trade at a current 8.6 P/E and 2.2 P/B compared to averages of 12.5 and 1.5 for its peers in the auto/truck OEM group, and they sport an attractive 1.4% dividend yield compared to the 0% average for the company's peers.

The following are some additional auto group stocks that mega funds accumulated in Q4 (see Table):

  • Delphi Automotive Plc (DLPH), a manufacturer of vehicle components, powertrain, safety and thermal technology solutions for automotive and commercial vehicle markets worldwide, in which mega funds together added a new $626 million position in Q4.

  • General Motors Company (GM), a global automaker that produces cars and trucks and sells them under the brand names Chevrolet, Cadillac, GMC, Buick and other brands worldwide, in which mega funds together added a net $234 million in Q4 to their $7.47 billion prior quarter position in the company.

  • Automotive parts store chain operator O'Reilly Automotive Inc. (ORLY), in which mega funds together added a net $205 million in Q4 to their $4.15 billion prior quarter position in the company.

  • TRW Automotive Holdings (TRW), a manufacturer of active and passive safety related products for automotive OEMs, in which mega funds together added a net $151 million in Q4 to their $2.18 billion prior quarter position in the company.

  • LKQ Corp. (LKQX), the largest nationwide provider of recycled OEM automotive replacement parts and related services to collision and mechanical repair shops throughout most major markets in the U.S., in which mega funds together added a net $120 million in Q4 to their $713 million prior quarter position in the company.

  • High-performance, low-emission engines and fuel injection systems manufacturer Westport Innovations Inc. (WPRT), in which mega funds together added a net $98 million in Q4 to their $114 million prior quarter position in the company.

  • Goodyear Tire & Rubber (GT), one of the world's largest tire companies and a very well-known worldwide brand as its tires are marketed in almost every country. Goodyear manufactures tires, engineered rubber products and rubber-related chemicals for transportation and industrial markets. Mega funds together added a net $13 million in Q4 to their $842 million prior quarter position in the company.

Besides these, mega funds based on their Q4 trading activity indicated that they are bearish on the following auto group stocks (see Table):

  • Johnson Control Inc. (JCI), that manufactures automotive interior systems and batteries for OEMs and control systems for non-residential buildings, in which mega funds together cut a net $246 million in Q4 from their $10.53 billion prior quarter position in the company.
  • Paccar Inc. (PCAR), a designer, manufacturer, and distributor of light-, medium-, and heavy-duty trucks and related aftermarket parts primarily in the United States and Europe, in which mega funds together cut a net $110 million in Q4 from their $5.39 billion prior quarter position in the company.
  • Auto manufacturer Toyota Motor Co. (TM), in which mega funds together cut a net $62 million in Q4 from their $448 million prior quarter position in the company.
  • Honeywell Intl Inc. (HON), a provider of automotive and aerospace products, security technologies, specialty materials and engine systems, in which mega funds together cut a net $49 million in Q4 from their $20.45 billion prior quarter position in the company.
  • Indian company Tata Motors Ltd. ADS (TTM) that makes passenger cars, commercial vehicles, utility vehicles and accessories, in which mega funds together cut a net $35 million in Q4 from their $395 million prior quarter position in the company.

Table

(Click to enlarge)

This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top High Dividend Yield, Undervalued Auto Group Picks By The World's Largest Money Managers