How Chemtura Corp (CHMT) Stacks Up Against Its Peers

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Chemtura Corp (NYSE:CHMT).

Is Chemtura Corp (NYSE:CHMT) a superb investment right now? Prominent investors are taking an optimistic view. The number of long hedge fund positions improved by 2 lately. At the end of this article we will also compare CHMT to other stocks including FTI Consulting, Inc. (NYSE:FCN), Oasis Petroleum Inc. (NYSE:OAS), and Main Street Capital Corporation (NYSE:MAIN) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

SUWIT NGAOKAEW/Shutterstock.com

How have hedgies been trading Chemtura Corp (NYSE:CHMT)?

Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 9% increase from the previous quarter. After a steep decline in Q1, hedge fund ownership has now rebounded to sit just under its levels as of December 31, 2015. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Chemtura Corp (NYSE:CHMT). GAMCO Investors has a $178 million position in the stock, comprising 1.2% of its 13F portfolio. Coming in second is Alec Litowitz and Ross Laser of Magnetar Capital, with an $85.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Neil Chriss’ Hutchin Hill Capital, Gilchrist Berg’s Water Street Capital and John A. Levin’s Levin Capital Strategies.

Consequently, specific money managers have been driving this bullishness. Magnetar Capital initiated the most outsized position in Chemtura Corp (NYSE:CHMT). Hutchin Hill Capital also initiated a $23.5 million position during the quarter. The following funds were also among the new CHMT investors: Joel Greenblatt’s Gotham Asset Management, Matthew Halbower’s Pentwater Capital Management, and Ian Cumming and Joseph Steinberg’s Leucadia National.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Chemtura Corp (NYSE:CHMT) but similarly valued. These stocks are FTI Consulting, Inc. (NYSE:FCN), Oasis Petroleum Inc. (NYSE:OAS), Main Street Capital Corporation (NYSE:MAIN), and Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO). This group of stocks’ market values resemble CHMT’s market value.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $380 million in CHMT’s case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 8 bullish hedge fund positions. Chemtura Corp (NYSE:CHMT) 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. In this regard OAS might be a better candidate to consider a long position in.

Disclosure: None