At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Celanese Corporation (NYSE:CE).
Is Celanese Corporation (NYSE:CE) a buy here? Money managers are becoming less hopeful. The number of long hedge fund positions retreated by 2 lately. Our calculations also showed that CE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are plenty of methods market participants have at their disposal to grade stocks. A pair of the less utilized methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top investment managers can outperform the S&P 500 by a very impressive amount (see the details here).
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the latest hedge fund action encompassing Celanese Corporation (NYSE:CE).
How have hedgies been trading Celanese Corporation (NYSE:CE)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CE over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Lyrical Asset Management was the largest shareholder of Celanese Corporation (NYSE:CE), with a stake worth $207.6 million reported as of the end of September. Trailing Lyrical Asset Management was GMT Capital, which amassed a stake valued at $188.7 million. AQR Capital Management, GLG Partners, and Gotham Asset 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 GMT Capital allocated the biggest weight to Celanese Corporation (NYSE:CE), around 10.59% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, earmarking 5.1 percent of its 13F equity portfolio to CE.
Due to the fact that Celanese Corporation (NYSE:CE) has experienced a decline in interest from the smart money, logic holds that there is a sect of hedgies that slashed their entire stakes in the first quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $23.9 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also sold off its stock, about $3.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Celanese Corporation (NYSE:CE) but similarly valued. We will take a look at Black Knight, Inc. (NYSE:BKI), Cypress Semiconductor Corporation (NASDAQ:CY), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), and Principal Financial Group Inc (NASDAQ:PFG). This group of stocks’ market valuations are similar to CE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKI | 32 | 372352 | 1 |
| CY | 46 | 2083415 | 10 |
| CHRW | 32 | 247903 | 8 |
| PFG | 27 | 118834 | 7 |
| Average | 34.25 | 705626 | 6.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $706 million. That figure was $509 million in CE’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NASDAQ:PFG) is the least popular one with only 27 bullish hedge fund positions. Celanese Corporation (NYSE:CE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CE as the stock returned 23.5% during the second quarter and outperformed the market by an even larger margin.
Follow Celanese Corp (NYSE:CE)
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Disclosure: None. This article was originally published at Insider Monkey.
