Do Hedge Funds Love CME Group Inc (CME)?

Does CME Group Inc (NASDAQ:CME) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

CME Group Inc (NASDAQ:CME) was in 48 hedge funds’ portfolios at the end of the third quarter of 2016. CME has seen a decrease in hedge fund interest lately. There were 49 hedge funds in our database with CME holdings at the end of the previous quarter. At the end of this article we will also compare CME to other stocks including CIGNA Corporation (NYSE:CI), Brookfield Asset Management Inc. (USA) (NYSE:BAM), and Monster Beverage Corp (NASDAQ:MNST) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, let’s take a glance at the fresh action regarding CME Group Inc (NASDAQ:CME).

What does the smart money think about CME Group Inc (NASDAQ:CME)?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, William von Mueffling’s Cantillon Capital Management has the number one position in CME Group Inc (NASDAQ:CME), worth close to $268.5 million, amounting to 3.8% of its total 13F portfolio. Coming in second is Panayotis Takis Sparaggis of Alkeon Capital Management, with a $133.3 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain D. E. Shaw’s D E Shaw, Christopher James’ Partner Fund Management and Phill Gross and Robert Atchinson’s Adage Capital Management.

Judging by the fact that CME Group Inc (NASDAQ:CME) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies that slashed their positions entirely in the third quarter. Intriguingly, Clint Carlson’s Carlson Capital sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $13.8 million in call options., and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $10.7 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CME Group Inc (NASDAQ:CME) but similarly valued. We will take a look at CIGNA Corporation (NYSE:CI), Brookfield Asset Management Inc. (USA) (NYSE:BAM), Monster Beverage Corp (NASDAQ:MNST), and Capital One Financial Corp. (NYSE:COF). This group of stocks’ market valuations resemble CME’s market valuation.

As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.86 billion. That figure was $980 million in CME’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Brookfield Asset Management Inc. (USA) (NYSE:BAM) is the least popular one with only 19 bullish hedge fund positions. CME Group Inc (NASDAQ:CME) 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. In this regard CI might be a better candidate to consider a long position.