Was The Smart Money Right About Corteva, Inc. (CTVA)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Corteva, Inc. (NYSE:CTVA).

Corteva, Inc. (NYSE:CTVA) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CTVA investors should be aware of an increase in hedge fund sentiment recently. There were 36 hedge funds in our database with CTVA positions at the end of the first quarter. Our calculations also showed that CTVA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

John Petry of Sessa Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to check out the key hedge fund action encompassing Corteva, Inc. (NYSE:CTVA).

What does smart money think about Corteva, Inc. (NYSE:CTVA)?

Heading into the third quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CTVA over the last 20 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Eminence Capital was the largest shareholder of Corteva, Inc. (NYSE:CTVA), with a stake worth $172.8 million reported as of the end of June. Trailing Eminence Capital was Sessa Capital, which amassed a stake valued at $170.1 million. Holocene Advisors, Glenview Capital, and Renaissance Technologies 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 Corteva, Inc. (NYSE:CTVA), around 17.09% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, dishing out 3.85 percent of its 13F equity portfolio to CTVA.

As one would reasonably expect, some big names have jumped into Corteva, Inc. (NYSE:CTVA) headfirst. Renaissance Technologies, established the biggest position in Corteva, Inc. (NYSE:CTVA). Renaissance Technologies had $55.7 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Lee Ainslie’s Maverick Capital, and Andrew Weiss’s Weiss Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Corteva, Inc. (NYSE:CTVA) but similarly valued. These stocks are Old Dominion Freight Line, Inc. (NASDAQ:ODFL), ZoomInfo Technologies Inc. (NASDAQ:ZI), PPL Corporation (NYSE:PPL), Edison International (NYSE:EIX), Wheaton Precious Metals Corp. (NYSE:WPM), Corning Incorporated (NYSE:GLW), and TD Ameritrade Holding Corp. (NASDAQ:AMTD). All of these stocks’ market caps resemble CTVA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $651 million. That figure was $775 million in CTVA’s case. TD Ameritrade Holding Corp. (NASDAQ:AMTD) is the most popular stock in this table. On the other hand Wheaton Precious Metals Corp. (NYSE:WPM) is the least popular one with only 21 bullish hedge fund positions. Corteva, Inc. (NYSE:CTVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CTVA is 72.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on CTVA as the stock returned 23.7% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.