In this article we will analyze whether CSX Corporation (NYSE:CSX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
CSX Corporation (NYSE:CSX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 58 hedge funds’ portfolios at the end of December. Our calculations also showed that CSX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare CSX to other stocks including FedEx Corporation (NYSE:FDX), Crown Castle International Corp. (NYSE:CCI), and Lam Research Corporation (NASDAQ:LRCX) to get a better sense of its popularity.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
John Armitage of Egerton Capital
At Insider Monkey we leave no stone unturned when looking for 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 best hydrogen fuel cell 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. With all of this in mind let’s take a peek at the fresh hedge fund action regarding CSX Corporation (NYSE:CSX).
Do Hedge Funds Think CSX Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSX over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Soroban Capital Partners was the largest shareholder of CSX Corporation (NYSE:CSX), with a stake worth $766.5 million reported as of the end of December. Trailing Soroban Capital Partners was Egerton Capital Limited, which amassed a stake valued at $594 million. Fisher Asset Management, Steadfast Capital Management, and Holocene Advisors 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 11 Capital Partners allocated the biggest weight to CSX Corporation (NYSE:CSX), around 5.85% of its 13F portfolio. Soroban Capital Partners is also relatively very bullish on the stock, dishing out 5.82 percent of its 13F equity portfolio to CSX.
Because CSX Corporation (NYSE:CSX) has experienced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q1. Intriguingly, Daniel S. Och’s OZ Management cut the largest position of all the hedgies tracked by Insider Monkey, comprising about $105.1 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $38.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CSX Corporation (NYSE:CSX) but similarly valued. We will take a look at FedEx Corporation (NYSE:FDX), Crown Castle International Corp. (NYSE:CCI), Lam Research Corporation (NASDAQ:LRCX), Duke Energy Corporation (NYSE:DUK), Autodesk, Inc. (NASDAQ:ADSK), The Sherwin-Williams Company (NYSE:SHW), and The Bank of Nova Scotia (NYSE:BNS). All of these stocks’ market caps are similar to CSX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FDX | 63 | 2012460 | -8 |
| CCI | 40 | 2071704 | -2 |
| LRCX | 56 | 2619776 | 1 |
| DUK | 38 | 614751 | 2 |
| ADSK | 66 | 3528315 | 1 |
| SHW | 49 | 1881345 | -6 |
| BNS | 19 | 336708 | 5 |
| Average | 47.3 | 1866437 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.3 hedge funds with bullish positions and the average amount invested in these stocks was $1866 million. That figure was $3315 million in CSX’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 19 bullish hedge fund positions. CSX Corporation (NYSE: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 74.1. 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. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately CSX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CSX were disappointed as the stock returned 11.4% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Csx Corp (NYSE:CSX)
Follow Csx Corp (NYSE:CSX)
Disclosure: None. This article was originally published at Insider Monkey.
