The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded CVR Partners LP (NYSE:UAN) based on those filings.
Hedge fund interest in CVR Partners LP (NYSE:UAN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Container Store Group Inc (NYSE:TCS), New Age Beverages Corporation (NASDAQ:NBEV), and Esquire Financial Holdings, Inc. (NASDAQ:ESQ) to gather more data points. Our calculations also showed that UAN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Martin of Raging Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s take a look at the fresh hedge fund action surrounding CVR Partners LP (NYSE:UAN).
How have hedgies been trading CVR Partners LP (NYSE:UAN)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in UAN a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Raging Capital Management, managed by William C. Martin, holds the largest position in CVR Partners LP (NYSE:UAN). Raging Capital Management has a $9 million position in the stock, comprising 6.8% of its 13F portfolio. The second most bullish fund manager is Glendon Capital Management, led by Matthew Barrett, holding a $2.4 million position; the fund has 0.8% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to CVR Partners LP (NYSE:UAN), around 6.79% of its 13F portfolio. Glendon Capital Management is also relatively very bullish on the stock, setting aside 0.8 percent of its 13F equity portfolio to UAN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to CVR Partners LP (NYSE:UAN). These stocks are Container Store Group Inc (NYSE:TCS), New Age Beverages Corporation (NASDAQ:NBEV), Esquire Financial Holdings, Inc. (NASDAQ:ESQ), and J.C. Penney Company, Inc. (NYSE:JCP). This group of stocks’ market valuations resemble UAN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCS | 8 | 4698 | -5 |
| NBEV | 4 | 710 | -1 |
| ESQ | 4 | 9081 | -1 |
| JCP | 12 | 8075 | -3 |
| Average | 7 | 5641 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $11 million in UAN’s case. J.C. Penney Company, Inc. (NYSE:JCP) is the most popular stock in this table. On the other hand New Age Beverages Corporation (NASDAQ:NBEV) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CVR Partners LP (NYSE:UAN) is even less popular than NBEV. Hedge funds dodged a bullet by taking a bearish stance towards UAN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately UAN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); UAN investors were disappointed as the stock returned -10.7% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
