We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Commercial Metals Company (NYSE:CMC) based on that data.
Is Commercial Metals Company (NYSE:CMC) a buy, sell, or hold? Prominent investors are betting on the stock. The number of bullish hedge fund bets went up by 7 recently. Our calculations also showed that CMC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are assumed to be worthless, old financial vehicles of the past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the bigwigs of this club, about 850 funds. These investment experts direct the majority of all hedge funds’ total asset base, and by keeping an eye on their first-class stock picks, Insider Monkey has come up with a number of investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action encompassing Commercial Metals Company (NYSE:CMC).
How are hedge funds trading Commercial Metals Company (NYSE:CMC)?
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in CMC 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.
Among these funds, Citadel Investment Group held the most valuable stake in Commercial Metals Company (NYSE:CMC), which was worth $114.5 million at the end of the third quarter. On the second spot was Highline Capital Management which amassed $34.5 million worth of shares. D E Shaw, Millennium Management, and Scopus Asset Management 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 Highline Capital Management allocated the biggest weight to Commercial Metals Company (NYSE:CMC), around 5.46% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.69 percent of its 13F equity portfolio to CMC.
As industrywide interest jumped, specific money managers have jumped into Commercial Metals Company (NYSE:CMC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Commercial Metals Company (NYSE:CMC). Marshall Wace LLP had $2.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.9 million investment in the stock during the quarter. The other funds with brand new CMC positions are Joel Greenblatt’s Gotham Asset Management, Peter Muller’s PDT Partners, and Qing Li’s Sciencast Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Commercial Metals Company (NYSE:CMC) but similarly valued. These stocks are Pattern Energy Group Inc (NASDAQ:PEGI), Everbridge, Inc. (NASDAQ:EVBG), New Fortress Energy LLC (NASDAQ:NFE), and BioScrip Inc. (NASDAQ:BIOS). This group of stocks’ market caps match CMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEGI | 22 | 103268 | 8 |
| EVBG | 37 | 565362 | 5 |
| NFE | 1 | 26125 | -3 |
| BIOS | 14 | 85606 | -4 |
| Average | 18.5 | 195090 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $265 million in CMC’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 1 bullish hedge fund positions. Commercial Metals Company (NYSE:CMC) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CMC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CMC were disappointed as the stock returned -38.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
