Hedge Funds Are Buying Sociedad Química y Minera de Chile S.A. (SQM)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sociedad Química y Minera de Chile S.A. (NYSE:SQM).

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) investors should be aware of an increase in activity from the world’s largest hedge funds lately. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 20. There were 16 hedge funds in our database with SQM positions at the end of the first quarter. Our calculations also showed that SQM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Jonathan Barrett of Luminus Management

Keeping this in mind let’s analyze the new hedge fund action encompassing Sociedad Química y Minera de Chile S.A. (NYSE:SQM).

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

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the first quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in SQM a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Sociedad Química y Minera de Chile S.A. (NYSE:SQM), with a stake worth $30.6 million reported as of the end of June. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $21 million. Chiron Investment Management, Luminus Management, and SailingStone Capital 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 Axel Capital Management allocated the biggest weight to Sociedad Química y Minera de Chile S.A. (NYSE:SQM), around 4.93% of its 13F portfolio. SailingStone Capital Partners is also relatively very bullish on the stock, dishing out 2.47 percent of its 13F equity portfolio to SQM.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Chiron Investment Management, managed by Ryan Caldwell, initiated the most valuable position in Sociedad Química y Minera de Chile S.A. (NYSE:SQM). Chiron Investment Management had $16.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $11.5 million investment in the stock during the quarter. The other funds with brand new SQM positions are Alexander Mitchell’s Scopus Asset Management, Philip Best’s Quaero Capital, and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sociedad Química y Minera de Chile S.A. (NYSE:SQM) but similarly valued. These stocks are C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Annaly Capital Management, Inc. (NYSE:NLY), Texas Pacific Land Corporation (NYSE:TPL), Cemex SAB de CV (NYSE:CX), Cna Financial Corporation (NYSE:CNA), Sibanye Stillwater Limited (NYSE:SBSW), and Invesco Ltd. (NYSE:IVZ). This group of stocks’ market caps are closest to SQM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $156 million in SQM’s case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Cna Financial Corporation (NYSE:CNA) is the least popular one with only 13 bullish hedge fund positions. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SQM is 47.6. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on SQM as the stock returned 11.4% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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