The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. What do these smart investors think about United States Steel Corporation (NYSE:X)?
Is United States Steel Corporation (NYSE:X) a bargain? Money managers are taking a bullish view. The number of long hedge fund bets increased by 1 in recent months. Our calculations also showed that X isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). X was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with X holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing United States Steel Corporation (NYSE:X).
How are hedge funds trading United States Steel Corporation (NYSE:X)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in X a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the biggest position in United States Steel Corporation (NYSE:X). Renaissance Technologies has a $81.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $40.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of David E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Alexander Mitchell’s Scopus Asset Management. In terms of the portfolio weights assigned to each position Angelo Gordon & Co allocated the biggest weight to United States Steel Corporation (NYSE:X), around 1.14% of its 13F portfolio. Concourse Capital Management is also relatively very bullish on the stock, designating 0.94 percent of its 13F equity portfolio to X.
Consequently, key money managers have jumped into United States Steel Corporation (NYSE:X) headfirst. Renaissance Technologies initiated the biggest position in United States Steel Corporation (NYSE:X). Renaissance Technologies had $81.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $4.2 million position during the quarter. The other funds with brand new X positions are Paul Marshall and Ian Wace’s Marshall Wace, Sara Nainzadeh’s Centenus Global Management, and Joseph Mathias’s Concourse Capital Management.
Let’s now review hedge fund activity in other stocks similar to United States Steel Corporation (NYSE:X). These stocks are Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Hertz Global Holdings, Inc. (NYSE:HTZ), Norbord Inc. (NYSE:OSB), and Mack Cali Realty Corp (NYSE:CLI). This group of stocks’ market caps are similar to X’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KTOS | 21 | 76636 | 3 |
| HTZ | 25 | 1158188 | -5 |
| OSB | 6 | 15366 | 0 |
| CLI | 13 | 139793 | 0 |
| Average | 16.25 | 347496 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $169 million in X’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Norbord Inc. (NYSE:OSB) is the least popular one with only 6 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 calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on X as the stock returned 14% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
