CVR Energy, Inc. (CVI): Hedge Funds Are Bearish, What Should You Do?

CVR Energy, Inc. (NYSE:CVI) was in 15 hedge funds’ portfolio at the end of March. CVI investors should be aware of a decrease in hedge fund sentiment of late. There were 16 hedge funds in our database with CVI holdings at the end of the previous quarter.

To most investors, hedge funds are perceived as underperforming, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, we look at the upper echelon of this club, around 450 funds. It is widely believed that this group controls the lion’s share of the smart money’s total capital, and by keeping an eye on their best picks, we have unearthed a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as key, bullish insider trading sentiment is another way to break down the world of equities. Just as you’d expect, there are lots of motivations for an insider to sell shares of his or her company, but just one, very clear reason why they would buy. Various empirical studies have demonstrated the valuable potential of this method if “monkeys” know where to look (learn more here).

With all of this in mind, it’s important to take a glance at the key action surrounding CVR Energy, Inc. (NYSE:CVI).

Hedge fund activity in CVR Energy, Inc. (NYSE:CVI)

Heading into Q2, a total of 15 of the hedge funds we track held long positions in this stock, a change of -6% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully.

According to our comprehensive database, Carl Icahn’s Icahn Capital LP had the most valuable position in CVR Energy, Inc. (NYSE:CVI), worth close to $3.6753 billion, accounting for 21.7% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $41.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

Because CVR Energy, Inc. (NYSE:CVI) has experienced falling interest from the smart money, it’s safe to say that there were a few money managers that slashed their entire stakes at the end of the first quarter. Interestingly, Curtis Macnguyen’s Ivory Capital (Investment Mgmt) sold off the biggest position of the “upper crust” of funds we monitor, valued at an estimated $9.7 million in stock., and Thomas Lenox Kempner of Davidson Kempner was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds at the end of the first quarter.

What have insiders been doing with CVR Energy, Inc. (NYSE:CVI)?

Insider buying is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the latest six-month time period, CVR Energy, Inc. (NYSE:CVI) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to CVR Energy, Inc. (NYSE:CVI). These stocks are Access Midstream Partners LP (NYSE:ACMP), Western Refining, Inc. (NYSE:WNR), PBF Energy Inc (NYSE:PBF), and InterOil Corporation (USA) (NYSE:IOC). This group of stocks belong to the oil & gas refining & marketing industry and their market caps match CVI’s market cap.

With the results exhibited by the aforementioned strategies, retail investors should always watch hedge fund and insider trading sentiment, and CVR Energy, Inc. (NYSE:CVI) is no exception.

Click here to learn why you should track hedge funds