Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Celanese Corporation (NYSE:CE) makes for a good investment right now.
Is Celanese Corporation (NYSE:CE) a buy, sell, or hold? Hedge funds are becoming hopeful. The number of bullish hedge fund positions moved up by 10 recently. Our calculations also showed that CE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
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 let’s take a gander at the key hedge fund action surrounding Celanese Corporation (NYSE:CE).
What does smart money think about Celanese Corporation (NYSE:CE)?
Heading into the first quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in CE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the most valuable position in Celanese Corporation (NYSE:CE), worth close to $382.6 million, accounting for 5.2% of its total 13F portfolio. The second most bullish fund manager is GMT Capital, managed by Thomas E. Claugus, which holds a $353.2 million position; the fund has 13.6% of its 13F portfolio invested in the stock. Some other peers with similar optimism contain Cliff Asness’s AQR Capital Management, Noam Gottesman’s GLG Partners and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Celanese Corporation (NYSE:CE), around 13.63% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, designating 5.21 percent of its 13F equity portfolio to CE.
Now, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Celanese Corporation (NYSE:CE). Point72 Asset Management had $23.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $8.1 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Benjamin A. Smith’s Laurion Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Celanese Corporation (NYSE:CE) but similarly valued. These stocks are CNH Industrial NV (NYSE:CNHI), Evergy, Inc. (NYSE:EVRG), Cardinal Health, Inc. (NYSE:CAH), and Agnico Eagle Mines Limited (NYSE:AEM). This group of stocks’ market caps resemble CE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNHI | 16 | 333220 | -1 |
| EVRG | 25 | 942248 | -2 |
| CAH | 34 | 667856 | 6 |
| AEM | 34 | 413114 | 0 |
| Average | 27.25 | 589110 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $925 million in CE’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 16 bullish hedge fund positions. Celanese Corporation (NYSE:CE) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CE were disappointed as the stock returned -46% 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.
