Did Hedge Funds Make The Right Call On Constellium SE (CSTM) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. 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 we look at how hedge funds traded Constellium SE (NYSE:CSTM) and determine whether the smart money was really smart about this stock.

Constellium SE (NYSE:CSTM) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that CSTM 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.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action encompassing Constellium SE (NYSE:CSTM).

What have hedge funds been doing with Constellium SE (NYSE:CSTM)?

At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -32% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSTM over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Constellium SE (NYSE:CSTM) was held by Nut Tree Capital, which reported holding $21.1 million worth of stock at the end of September. It was followed by Park West Asset Management with a $16.7 million position. Other investors bullish on the company included Kingdon Capital, BeaconLight Capital, and Brigade Capital. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Constellium SE (NYSE:CSTM), around 15.04% of its 13F portfolio. Nut Tree Capital is also relatively very bullish on the stock, setting aside 9.47 percent of its 13F equity portfolio to CSTM.

Due to the fact that Constellium SE (NYSE:CSTM) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their entire stakes heading into Q4. It’s worth mentioning that David Rosen’s Rubric Capital Management said goodbye to the largest stake of all the hedgies followed by Insider Monkey, comprising close to $23.2 million in stock, and Robert Polak’s Anchor Bolt Capital was right behind this move, as the fund dropped about $16.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 16 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Constellium SE (NYSE:CSTM). We will take a look at Tilray, Inc. (NASDAQ:TLRY), Materion Corp (NYSE:MTRN), The Providence Service Corporation (NASDAQ:PRSC), and Transocean Ltd (NYSE:RIG). This group of stocks’ market valuations are similar to CSTM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $141 million in CSTM’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand The Providence Service Corporation (NASDAQ:PRSC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Constellium SE (NYSE:CSTM) 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 CSTM as the stock returned 47.4% 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.

Disclosure: None. This article was originally published at Insider Monkey.