We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of United States Steel Corporation (NYSE:X).
United States Steel Corporation (NYSE:X) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that X isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James Dondero of Highland Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the recent hedge fund action regarding United States Steel Corporation (NYSE:X).
How have hedgies been trading United States Steel Corporation (NYSE:X)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in X a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in United States Steel Corporation (NYSE:X) was held by Renaissance Technologies, which reported holding $97.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $44.5 million position. Other investors bullish on the company included D E Shaw, Encompass Capital Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to United States Steel Corporation (NYSE:X), around 2.47% of its 13F portfolio. Angelo Gordon & Co is also relatively very bullish on the stock, designating 1.37 percent of its 13F equity portfolio to X.
As one would reasonably expect, specific money managers have been driving this bullishness. Encompass Capital Advisors, managed by Todd J. Kantor, assembled the biggest position in United States Steel Corporation (NYSE:X). Encompass Capital Advisors had $13.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $13 million position during the quarter. The other funds with new positions in the stock are Daniel S. Och’s OZ Management, Robert Vincent McHugh’s Jade Capital Advisors, and Sara Nainzadeh’s Centenus Global Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United States Steel Corporation (NYSE:X) but similarly valued. We will take a look at Capitol Federal Financial, Inc. (NASDAQ:CFFN), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Knowles Corp (NYSE:KN), and Ping Identity Holding Corp. (NYSE:PING). This group of stocks’ market caps are similar to X’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFFN | 16 | 142701 | 2 |
| PPBI | 12 | 47542 | 4 |
| KN | 29 | 307346 | 1 |
| PING | 10 | 38698 | -8 |
| Average | 16.75 | 134072 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $179 million in X’s case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand Ping Identity Holding Corp. (NYSE:PING) is the least popular one with only 10 bullish hedge fund positions. United States Steel Corporation (NYSE:X) 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. 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. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately X wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on X were disappointed as the stock returned -44.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
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.
