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 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Cummins Inc. (NYSE:CMI).
Is CMI a good stock to buy now? Cummins Inc. (NYSE:CMI) has seen an increase in hedge fund sentiment of late. Cummins Inc. (NYSE:CMI) was in 49 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CMI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Robert Atchinson of Adage Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s review the new hedge fund action regarding Cummins Inc. (NYSE:CMI).
Do Hedge Funds Think CMI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 49 of the hedge funds t
racked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CMI over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Cummins Inc. (NYSE:CMI), with a stake worth $136.1 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $89.6 million. Alyeska Investment Group, Samlyn Capital, and Scopus Asset Management 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 MIK Capital allocated the biggest weight to Cummins Inc. (NYSE:CMI), around 6.42% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, dishing out 4.22 percent of its 13F equity portfolio to CMI.
As one would reasonably expect, key money managers have jumped into Cummins Inc. (NYSE:CMI) headfirst. Samlyn Capital, managed by Robert Pohly, initiated the most valuable position in Cummins Inc. (NYSE:CMI). Samlyn Capital had $31 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $29.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Richard Driehaus’s Driehaus Capital, and Ryan Caldwell’s Chiron Investment Management.
Let’s now take a look at hedge fund activity in other stocks similar to Cummins Inc. (NYSE:CMI). These stocks are IHS Markit Ltd. (NYSE:INFO), Walgreens Boots Alliance Inc (NASDAQ:WBA), Agilent Technologies Inc. (NYSE:A), Datadog, Inc. (NASDAQ:DDOG), Banco Santander, S.A. (NYSE:SAN), WEC Energy Group, Inc. (NYSE:WEC), and The Bank of New York Mellon Corporation (NYSE:BK). All of these stocks’ market caps are closest to CMI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFO | 44 | 1283750 | 0 |
| WBA | 33 | 285947 | -12 |
| A | 39 | 3221001 | 1 |
| DDOG | 42 | 2604703 | -15 |
| SAN | 14 | 232246 | -2 |
| WEC | 22 | 237741 | -8 |
| BK | 48 | 3728518 | 0 |
| Average | 34.6 | 1656272 | -5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $1656 million. That figure was $673 million in CMI’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Cummins Inc. (NYSE:CMI) is more popular among hedge funds. Our overall hedge fund sentiment score for CMI is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately CMI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CMI were disappointed as the stock returned 5.3% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
