Were Hedge Funds Right About CSX Corporation (CSX)?

Is CSX Corporation (NASDAQ:CSX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is CSX Corporation (NASDAQ:CSX) ready to rally soon? The best stock pickers were becoming more confident. The number of long hedge fund bets increased by 3 in recent months. CSX Corporation (NASDAQ:CSX) was in 56 hedge funds’ portfolios at the end of June. The all time high for this statistic is 63. Our calculations also showed that CSX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To the average investor there are tons of indicators market participants put to use to analyze their holdings. A pair of the less known indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite investment managers can outperform the broader indices by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Eric Mandelblatt of Soroban Capital Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the new hedge fund action encompassing CSX Corporation (NASDAQ:CSX).

Do Hedge Funds Think CSX Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in CSX a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in CSX Corporation (NASDAQ:CSX) was held by Soroban Capital Partners, which reported holding $1034.1 million worth of stock at the end of June. It was followed by Egerton Capital Limited with a $1024.9 million position. Other investors bullish on the company included Fisher Asset Management, Two Sigma Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Soroban Capital Partners allocated the biggest weight to CSX Corporation (NASDAQ:CSX), around 8.73% of its 13F portfolio. 11 Capital Partners is also relatively very bullish on the stock, earmarking 6.09 percent of its 13F equity portfolio to CSX.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in CSX Corporation (NASDAQ:CSX). Balyasny Asset Management had $28.5 million invested in the company at the end of the quarter. Jos Shaver’s Electron Capital Partners also made a $26.9 million investment in the stock during the quarter. The following funds were also among the new CSX investors: Gregg Moskowitz’s Interval Partners, Michael Cowley’s Sandbar Asset Management, and Dipak Patel’s Alight Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CSX Corporation (NASDAQ:CSX) but similarly valued. These stocks are The Sherwin-Williams Company (NYSE:SHW), Coupang, Inc. (NYSE:CPNG), Equinix, Inc. (REIT) (NASDAQ:EQIX), Snowflake Inc (NYSE:SNOW), Marsh & McLennan Companies, Inc. (NYSE:MMC), Chubb Limited (NYSE:CB), and Baidu, Inc. (NASDAQ:BIDU). This group of stocks’ market valuations are similar to CSX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.7 hedge funds with bullish positions and the average amount invested in these stocks was $5942 million. That figure was $4224 million in CSX’s case. Snowflake Inc (NYSE:SNOW) is the most popular stock in this table. On the other hand Coupang, Inc. (NYSE:CPNG) is the least popular one with only 33 bullish hedge fund positions. CSX Corporation (NASDAQ:CSX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSX is 65.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on CSX as the stock returned 13.1% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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