Is CVR Energy, Inc. (CVI) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

CVR Energy, Inc. (NYSE:CVI) shareholders have witnessed a decrease in hedge fund interest recently. CVI was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with CVI positions at the end of the previous quarter. At the end of this article we will also compare CVI to other stocks including Western Refining Logistics LP(NYSE:WNRL), iRobot Corporation (NASDAQ:IRBT), and COMSCORE, Inc. (NASDAQ:SCOR) 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.

tcly / shutterstock.com

How are hedge funds trading CVR Energy, Inc. (NYSE:CVI)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 19% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in CVI heading into this year. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Carl Icahn’s Icahn Capital LP holds the largest position in CVR Energy, Inc. (NYSE:CVI). Icahn Capital LP has a $980.4 million position in the stock, comprising 5% of its 13F portfolio. On Icahn Capital LP’s heels is one of the biggest hedge funds in the world, Millennium Management, with a $16.2 million position. Remaining peers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and Dmitry Balyasny’s Balyasny Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually sold off their positions entirely. It’s worth mentioning that Cliff Asness’ AQR Capital Management sold off the biggest position of all the investors studied by Insider Monkey, worth close to $10 million in stock, and First Eagle Investment Management was right behind this move, as the fund sold off about $2.6 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CVR Energy, Inc. (NYSE:CVI) but similarly valued. We will take a look at Western Refining Logistics LP(NYSE:WNRL), iRobot Corporation (NASDAQ:IRBT), COMSCORE, Inc. (NASDAQ:SCOR), and ESCO Technologies Inc. (NYSE:ESE). This group of stocks’ market valuations are similar to CVI’s market valuation.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $1012 million in CVI’s case. COMSCORE, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 5 bullish hedge fund positions. CVR Energy, Inc. (NYSE:CVI) 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 SCOR might be a better candidate to consider taking a long position in.

Disclosure: None