The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCleveland-Cliffs Inc (NYSE:CLF) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Cleveland-Cliffs Inc (NYSE:CLF) investors should pay attention to a decrease in enthusiasm from smart money of late. CLF was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 31 hedge funds in our database with CLF positions at the end of the previous quarter. Our calculations also showed that CLF 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s take a glance at the fresh hedge fund action surrounding Cleveland-Cliffs Inc (NYSE:CLF).
Hedge fund activity in Cleveland-Cliffs Inc (NYSE:CLF)
At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in CLF a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Cleveland-Cliffs Inc (NYSE:CLF) was held by Fisher Asset Management, which reported holding $36.1 million worth of stock at the end of September. It was followed by D E Shaw with a $10.4 million position. Other investors bullish on the company included Masters Capital Management, Citadel Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Masters Capital Management allocated the biggest weight to Cleveland-Cliffs Inc (NYSE:CLF), around 0.92% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to CLF.
Since Cleveland-Cliffs Inc (NYSE:CLF) has experienced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of funds who sold off their entire stakes last quarter. It’s worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners sold off the biggest stake of all the hedgies watched by Insider Monkey, totaling about $31.9 million in stock. Todd J. Kantor’s fund, Encompass Capital Advisors, also sold off its stock, about $12.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cleveland-Cliffs Inc (NYSE:CLF) but similarly valued. We will take a look at ServisFirst Bancshares, Inc. (NASDAQ:SFBS), Phoenix Tree Holdings Limited (NYSE:DNK), National Vision Holdings, Inc. (NASDAQ:EYE), and LexinFintech Holdings Ltd. (NASDAQ:LX). This group of stocks’ market valuations are closest to CLF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFBS | 10 | 10012 | 1 |
| DNK | 3 | 21532 | 3 |
| EYE | 14 | 199114 | -1 |
| LX | 17 | 39778 | 4 |
| Average | 11 | 67609 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $77 million in CLF’s case. LexinFintech Holdings Ltd. (NASDAQ:LX) is the most popular stock in this table. On the other hand Phoenix Tree Holdings Limited (NYSE:DNK) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Cleveland-Cliffs Inc (NYSE:CLF) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CLF as the stock returned 42% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
