Were Hedge Funds Right About Loading Up On The Chemours Company (CC)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Chemours Company (NYSE:CC).

Is The Chemours Company (NYSE:CC) a good investment today? The best stock pickers were in a bullish mood. The number of bullish hedge fund bets advanced by 3 recently. The Chemours Company (NYSE:CC) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that CC 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). There were 32 hedge funds in our database with CC positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Einhorn of Greenlight Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. 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 take a glance at the key hedge fund action surrounding The Chemours Company (NYSE:CC).

How are hedge funds trading The Chemours Company (NYSE:CC)?

Heading into the third quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the first quarter of 2020. By comparison, 28 hedge funds held shares or bullish call options in CC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Sessa Capital held the most valuable stake in The Chemours Company (NYSE:CC), which was worth $166.1 million at the end of the third quarter. On the second spot was Miller Value Partners which amassed $62.7 million worth of shares. Greenlight Capital, Arrowstreet Capital, and Two Sigma 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 Sessa Capital allocated the biggest weight to The Chemours Company (NYSE:CC), around 16.69% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, designating 5.65 percent of its 13F equity portfolio to CC.

As aggregate interest increased, some big names were leading the bulls’ herd. Portolan Capital Management, managed by George McCabe, established the most outsized position in The Chemours Company (NYSE:CC). Portolan Capital Management had $6 million invested in the company at the end of the quarter. Travis Cocke’s Voss Capital also initiated a $3.5 million position during the quarter. The other funds with brand new CC positions are Donald Sussman’s Paloma Partners, Paul Tudor Jones’s Tudor Investment Corp, and Noam Gottesman’s GLG Partners.

Let’s now review hedge fund activity in other stocks similar to The Chemours Company (NYSE:CC). We will take a look at Casella Waste Systems Inc. (NASDAQ:CWST), eHealth, Inc. (NASDAQ:EHTH), Wintrust Financial Corporation (NASDAQ:WTFC), Trinity Industries, Inc. (NYSE:TRN), Insperity Inc (NYSE:NSP), Taylor Morrison Home Corp (NYSE:TMHC), and UMB Financial Corporation (NASDAQ:UMBF). This group of stocks’ market caps are similar to CC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $389 million in CC’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand UMB Financial Corporation (NASDAQ:UMBF) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks The Chemours Company (NYSE:CC) is more popular among hedge funds. Our overall hedge fund sentiment score for CC is 81.9. 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 returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on CC as the stock returned 32.8% since the end of June (through 10/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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