Hedge Funds Are Betting On CF Industries Holdings, Inc. (CF)

In this article we will analyze whether CF Industries Holdings, Inc. (NYSE:CF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is CF Industries Holdings, Inc. (NYSE:CF) a splendid investment today? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund positions increased by 2 recently. CF Industries Holdings, Inc. (NYSE:CF) was in 44 hedge funds’ portfolios at the end of March. The all time high for this statistic is 50. Our calculations also showed that CF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 42 hedge funds in our database with CF holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s go over the new hedge fund action surrounding CF Industries Holdings, Inc. (NYSE:CF).

Do Hedge Funds Think CF Is A Good Stock To Buy Now?

At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in CF a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Glendon Capital Management held the most valuable stake in CF Industries Holdings, Inc. (NYSE:CF), which was worth $162 million at the end of the fourth quarter. On the second spot was Greenhaven Associates which amassed $112.3 million worth of shares. D E Shaw, Arrowstreet Capital, and Castle Hook Partners 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 Glendon Capital Management allocated the biggest weight to CF Industries Holdings, Inc. (NYSE:CF), around 16.97% of its 13F portfolio. Castle Hook Partners is also relatively very bullish on the stock, dishing out 7.43 percent of its 13F equity portfolio to CF.

As industrywide interest jumped, specific money managers were breaking ground themselves. Castle Hook Partners, managed by Josh Donfeld and David Rogers, created the largest position in CF Industries Holdings, Inc. (NYSE:CF). Castle Hook Partners had $81.6 million invested in the company at the end of the quarter. Jeffrey Altman’s Owl Creek Asset Management also made a $24.1 million investment in the stock during the quarter. The following funds were also among the new CF investors: Alexander Mitchell’s Scopus Asset Management, Kevin D. Eng’s Columbus Hill Capital Management, and Brad Farber’s Atika Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CF Industries Holdings, Inc. (NYSE:CF) but similarly valued. We will take a look at Americold Realty Trust (NYSE:COLD), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Reliance Steel & Aluminum Co. (NYSE:RS), Algonquin Power & Utilities Corp. (NYSE:AQN), Magellan Midstream Partners, L.P. (NYSE:MMP), Owens Corning (NYSE:OC), and Athene Holding Ltd. (NYSE:ATH). This group of stocks’ market values are similar to CF’s market value.

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As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $880 million in CF’s case. Athene Holding Ltd. (NYSE:ATH) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 10 bullish hedge fund positions. CF Industries Holdings, Inc. (NYSE:CF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CF is 83.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on CF, though not to the same extent, as the stock returned 8.1% since Q1 (through June 18th) and outperformed the market as well.

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

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