Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about CME Group Inc (NASDAQ:CME) and compare its performance to hedge funds’ consensus picks in 2019.
Is CME Group Inc (NASDAQ:CME) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of long hedge fund positions increased by 7 recently. Our calculations also showed that CME isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
If you’d ask most investors, hedge funds are perceived as underperforming, outdated investment vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers hone in on the aristocrats of this group, approximately 750 funds. These investment experts handle most of the smart money’s total asset base, and by watching their finest equity investments, Insider Monkey has come up with numerous investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s check out the recent hedge fund action encompassing CME Group Inc (NASDAQ:CME).
What does smart money think about CME Group Inc (NASDAQ:CME)?
At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 53 hedge funds with a bullish position in CME a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, William von Mueffling’s Cantillon Capital Management has the most valuable position in CME Group Inc (NASDAQ:CME), worth close to $397.1 million, corresponding to 3.9% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $342.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Ken Griffin’s Citadel Investment Group, Robert M. P. Luciano’s VGI Partners and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to CME Group Inc (NASDAQ:CME), around 19.48% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, dishing out 7.91 percent of its 13F equity portfolio to CME.
As industrywide interest jumped, specific money managers have been driving this bullishness. Interval Partners, managed by Gregg Moskowitz, created the most valuable position in CME Group Inc (NASDAQ:CME). Interval Partners had $2.2 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Jaime Sterne’s Skye Global Management, Israel Englander’s Millennium Management, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CME Group Inc (NASDAQ:CME) but similarly valued. We will take a look at Goldman Sachs Group, Inc. (NYSE:GS), Chubb Limited (NYSE:CB), Sony Corporation (NYSE:SNE), and Ambev SA (NYSE:ABEV). This group of stocks’ market valuations are closest to CME’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GS | 72 | 8237468 | 11 |
| CB | 26 | 612921 | 1 |
| SNE | 26 | 783005 | -9 |
| ABEV | 18 | 384746 | 2 |
| Average | 35.5 | 2504535 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $2505 million. That figure was $2245 million in CME’s case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Ambev SA (NYSE:ABEV) is the least popular one with only 18 bullish hedge fund positions. CME Group Inc (NASDAQ:CME) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CME wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CME were disappointed as the stock returned 9.7% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
