Hedge Funds Aren’t Crazy About United States Steel Corporation (X) Anymore

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding United States Steel Corporation (NYSE:X).

Is United States Steel Corporation (NYSE:X) a good stock to buy now? Hedge funds were turning less bullish. The number of long hedge fund bets went down by 13 recently. United States Steel Corporation (NYSE:X) was in 26 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that X isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 39 hedge funds in our database with X holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s go over the recent hedge fund action regarding United States Steel Corporation (NYSE:X).

Jeffrey Gendell of Tontine Asset Management

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

Heading into the fourth quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in X a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in United States Steel Corporation (NYSE:X) was held by D E Shaw, which reported holding $143.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $100.5 million position. Other investors bullish on the company included Tontine Asset Management, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Tontine Asset Management allocated the biggest weight to United States Steel Corporation (NYSE:X), around 7.34% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, setting aside 3.72 percent of its 13F equity portfolio to X.

Since United States Steel Corporation (NYSE:X) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that decided to sell off their positions entirely heading into Q4. Intriguingly, Rajiv Jain’s GQG Partners sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $41.4 million in stock. Jonathan Barrett and Paul Segal’s fund, Luminus Management, also cut its stock, about $19.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 13 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United States Steel Corporation (NYSE:X) but similarly valued. These stocks are NeoGenomics, Inc. (NASDAQ:NEO), Remitly Global, Inc. (NASDAQ:RELY), Antero Resources Corp (NYSE:AR), Exponent, Inc. (NASDAQ:EXPO), DCP Midstream LP (NYSE:DCP), Quidel Corporation (NASDAQ:QDEL), and Manpowergroup Inc (NYSE:MAN). This group of stocks’ market valuations are similar to X’s market valuation.

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As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $576 million in X’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 4 bullish hedge fund positions. United States Steel Corporation (NYSE:X) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for X is 41.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately X wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on X were disappointed as the stock returned 5.1% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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