It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like The Chemours Company (NYSE:CC) and compare its performance against hedge funds’ favorite stocks.
The Chemours Company (NYSE:CC) was in 29 hedge funds’ portfolios at the end of the third quarter of 2019. CC investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 28 hedge funds in our database with CC positions at the end of the previous quarter. Our calculations also showed that CC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Einhorn of Greenlight Capital
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let’s review the new hedge fund action encompassing The Chemours Company (NYSE:CC).
How are hedge funds trading The Chemours Company (NYSE:CC)?
At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Sessa Capital held the most valuable stake in The Chemours Company (NYSE:CC), which was worth $102.8 million at the end of the third quarter. On the second spot was Greenlight Capital which amassed $96.9 million worth of shares. Arrowstreet Capital, Winton Capital Management, and Selz Capital 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 Sessa Capital allocated the biggest weight to The Chemours Company (NYSE:CC), around 11.72% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, setting aside 6.97 percent of its 13F equity portfolio to CC.
As aggregate interest increased, specific money managers were breaking ground themselves. Renaissance Technologies, founded by Jim Simons, initiated the biggest position in The Chemours Company (NYSE:CC). Renaissance Technologies had $4.6 million invested in the company at the end of the quarter. Bill Miller’s Miller Value Partners also initiated a $3.6 million position during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Paul Marshall and Ian Wace’s Marshall Wace, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to The Chemours Company (NYSE:CC). We will take a look at Saia Inc (NASDAQ:SAIA), Lattice Semiconductor Corporation (NASDAQ:LSCC), Tilray, Inc. (NASDAQ:TLRY), and Prospect Capital Corporation (NASDAQ:PSEC). All of these stocks’ market caps are similar to CC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAIA | 13 | 66696 | 4 |
| LSCC | 24 | 232643 | 4 |
| TLRY | 11 | 19410 | 0 |
| PSEC | 11 | 43044 | 0 |
| Average | 14.75 | 90448 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $273 million in CC’s case. Lattice Semiconductor Corporation (NASDAQ:LSCC) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks The Chemours Company (NYSE:CC) is more popular among hedge funds. 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. Unfortunately CC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CC were disappointed as the stock returned -32.5% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019.
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.
