Praxair, Inc. (PX): Are Hedge Funds Right About This Stock?

The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Praxair, Inc. (NYSE:PX) and find out how it is affected by hedge funds’ moves.

Is Praxair, Inc. (NYSE:PX) a buy here? Investors who are in the know are taking a bearish view. The number of bullish hedge fund bets were cut by 1 lately. PX was in 29 hedge funds’ portfolios at the end of the third quarter of 2015. There were 30 hedge funds in our database with PX holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as V.F. Corporation (NYSE:VFC), Emerson Electric Co. (NYSE:EMR), and Canadian Imperial Bank of Commerce (USA) (NYSE:CM) to gather more data points.

At the moment there are several signals market participants put to use to size up stocks. A couple of the less known signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the market by a very impressive amount (see the details here).

Keeping this in mind, let’s review the latest action encompassing Praxair, Inc. (NYSE:PX).

Hedge fund activity in Praxair, Inc. (NYSE:PX)

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Boykin Curry’s Eagle Capital Management has the most valuable position in Praxair, Inc. (NYSE:PX), worth close to $214 million, comprising 0.9% of its total 13F portfolio. The second largest stake is held by Edgar Wachenheim of Greenhaven Associates, with a $77.2 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).

Seeing as Praxair, Inc. (NYSE:PX) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Joshua Kaufman and Craig Nerenberg’s Brenner West Capital Partners cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $23.9 million in stock. Malcolm Fairbairn’s fund, Ascend Capital, also cut its stock, about $13.3 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Praxair, Inc. (NYSE:PX). These stocks are V.F. Corporation (NYSE:VFC), Emerson Electric Co. (NYSE:EMR), Canadian Imperial Bank of Commerce (USA) (NYSE:CM), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). This group of stocks’ market values are closest to PX’s market value.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $571 million. That figure was $749 million in PX’s case. V.F. Corporation (NYSE:VFC) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (USA) (NYSE:CM) is the least popular one with only 14 bullish hedge fund positions. Praxair, Inc. (NYSE:PX) 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 VFC might be a better candidate to consider a long position.