Lets take a look at hedge funds’ long and short positions in the European auto sector as auto sales have fallen to the lowest levels in two decades. Peugeot, Fiat and Volkswagen are popular in hedge fund portfolios (as long and short positions) see all hedge fund short positions here.
Auto Sales In Europe
Auto sales in Europe have plummeted to a 20-year low, falling 5.9 percent on a year-on-year basis in the latest data released from the European Automobile Manufacturers’ Association (ACEA). Reported car registrations in May were 1.08 million, the lowest since 1993. The rising unemployment in the EU has taken a toll on car sales, which declined for 18 straight months until March this year.
The U.K. remains the only country that has managed to post an increasing number of sales in these tough times, with sales rising another 11 percent in May. New auto registrations fell the most in Germany and France, the big daddies of EU. Germany, which capitalizes on one-fourth of the total auto market share in the eurozone, saw sales declining by 9.9 percent. France and Italy saw sales slip by 10.4 and 8 percent respectively. Interestingly Spain and Greece fared much better, where sales were down by only 2.6 and 1.4 percent.
Auto Sales: BMW Reports 6.6% Drop in May Sales
The declining market share of carmakers in Europe poses trouble for manufacturers like Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3), Peugeot SA (OTCMKTS:PEUGY) (EPA:UG), Fiat S.p.A. (OTCMKTS:FIATY), Renault SA (EPA:RNO) and Bayerische Motoren Werke AG (FRA:BMW) (ETR:BMW). In Q1 BMW reported a 3 percent decline in profit and 4 percent drop in revenues. In latest news BMW reported a drop of 6.6 percent in European sales in May.
Renault SA (EPA:RNO) on the other hand reported a major decline of 11.8 percent in revenues. Despite of dismal business in Europe, some of these automakers have managed to outperform in terms of share price. Renault SA (EPA:RNO) gained 42 percent YTD up to yesterday’s close, however BMW has fared a lot worse, down 4.2 percent over the same period.
Auto Sales: Volkswagen, the Short and Long Story
Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3) took the largest fall due to slower demand in Europe, reporting a 38 percent decline in overall profits in Q1. The automaker reported a 5 percent increase in unit sales, amounting to 2.4 million vehicles. Shares of the Audi maker are down 4.2 percent YTD. Additionally the company reported a 2.8 percent drop in European sales in May. Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3) is a short bet of BG Master Fund.
Most hedge funds have pitched Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3) as a winning cause, Dan Loeb conveyed his bullish view on the company in his Q1 investor letter. Odey Asset Management, TT International and Bramshott European also have a long position in Volkswagen.
Auto Sales: Peugeot, a Popular Short Bet
Peugeot SA (OTCMKTS:PEUGY) (EPA:UG), the French carmaker, is a popular short bet among hedge funds in France. Big names like Adage Capital, Odey Asset Management, Marshall Wace and D.E Shaw Group have bet against Peugeot SA (EPA:UG). Their bets could not be doing well as not only is Peugeot up 20 percent YTD, shares are trading even higher than they did when these shorts were disclosed towards the end of 2012. Peugeot sold 13 percent fewer automobiles in May in Europe.
Peugeot SA (OTCMKTS:PEUGY) (EPA:UG) suffered a 10.3 percent drop in sales in Q1. Shares of Peugeot fell in April when Q1 earnings came out but have been rallying since May, so it looks like a correction will soon unfold for the car company as shares are trading higher than Peugeot’s 2014 guidance.
Auto Sales: Fiat Also Reports Declining Profits
Fiat S.p.A. (OTCMKTS:FIATY), the Italian carmaker, has made the largest leap, shares are up 49 percent for the year. However Fiat’s sales in Europe fell 11 percent in May. Earlier Fiat reported a 2 percent decline in Q1 revenue and a huge 23 percent fall in profits. Fiat Industrial SpA (BIT:FI), manufacturer of heavy machinery and vehicles, reported a 22 percent drop in profits owing to reduced demand for trucks and construction vehicles whereas the revenue came in flat. Fiat Industrial SpA (BIT:FI) (BIT:FI) is up 4.9 percent YTD. Fiat S.p.A. (OTCMKTS:FIATY) is a short bet of Adage Capital, Marshall Wace whereas Fiat Industrial is a short position of Citadel Advisors.
The slowed auto sales in Europe have been predicted to extend through the next year as well. The sector is not expected to show improvement until the region makes progress in bringing down the record high unemployment rate of 12.2 percent.