Hedge Funds Are Betting On CSX Corporation (CSX)

Are hedgies bullish on trains? More specifically, on CSX Corporation (NYSE:CSX)?

If you were to ask many of your fellow readers, hedge funds are seen as delayed, outdated investment tools of an era lost to time. Although there are more than 8,000 hedge funds in operation today, Insider Monkey aim at the upper echelon of this club, about 525 funds. It is widely held that this group has its hands on most of the smart money’s total assets, and by tracking their highest performing equity investments, we’ve unearthed a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year 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 outperformed the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Equally as useful, optimistic insider trading sentiment is another way to analyze the financial markets. Obviously, there are a variety of incentives for an insider to cut shares of his or her company, but just one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the valuable potential of this tactic if investors understand what to do (learn more here).

Thus, let’s study the latest info for CSX Corporation (NYSE:CSX).

How are hedge funds trading CSX Corporation (NYSE:CSX)?

At Q2’s end, a total of 39 of the hedge funds we track held long positions in this stock, a change of 8% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably.

When using filings from the hedgies we track, Robert Bishop’s Impala Asset Management had the largest position in CSX Corporation (NYSE:CSX), worth close to $67.6 million, comprising 3.8% of its total 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $35.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism include Thomas Lenox Kempner’s Davidson Kempner, D. E. Shaw’s D E Shaw and James Dinan’s York Capital Management.

As industrywide interest increased, particular hedge funds have been driving this bullishness. Impala Asset Management, managed by Robert Bishop, created the largest position in CSX Corporation (NYSE:CSX). Impala Asset Management had 67.6 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $35.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Thomas Lenox Kempner’s Davidson Kempner, D. E. Shaw’s D E Shaw, and James Dinan’s York Capital Management.

Insider trading activity in CSX Corporation (NYSE:CSX)

Legal insider trading, particularly when it’s bullish, is best served when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time period, CSX Corporation (NYSE:CSX) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to CSX Corporation (NYSE:CSX). These stocks are Union Pacific Corporation (NYSE:UNP), Kansas City Southern (NYSE:KSU), Canadian National Railway (USA) (NYSE:CNI), Canadian Pacific Railway Limited (USA) (NYSE:CP), and Norfolk Southern Corp. (NYSE:NSC). This group of stocks are the members of the railroads industry and their market caps match CSX’s market cap.

Using the results demonstrated by Insider Monkey’s strategies, average investors should always keep one eye on hedge fund and insider trading sentiment, and CSX Corporation (NYSE:CSX) applies perfectly to this mantra.

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