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Cabot Corporation (CBT): Are Hedge Funds Right About This Stock?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cabot Corporation (NYSE:CBT).

Cabot Corporation (NYSE:CBT) has seen a decrease in activity from the world’s largest hedge funds recently. CBT was in 24 hedge funds’ portfolios at the end of the third quarter of 2018. There were 27 hedge funds in our database with CBT holdings at the end of the previous quarter. Our calculations also showed that CBT isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Let’s review the fresh hedge fund action encompassing Cabot Corporation (NYSE:CBT).

What does the smart money think about Cabot Corporation (NYSE:CBT)?

Heading into the fourth quarter of 2018, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in CBT over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CBT_dec2018

Among these funds, AQR Capital Management held the most valuable stake in Cabot Corporation (NYSE:CBT), which was worth $57.8 million at the end of the third quarter. On the second spot was Millennium Management which amassed $24.2 million worth of shares. Moreover, Royce & Associates, Adage Capital Management, and Scopus Asset Management were also bullish on Cabot Corporation (NYSE:CBT), allocating a large percentage of their portfolios to this stock.

Due to the fact that Cabot Corporation (NYSE:CBT) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management sold off the largest stake of the 700 funds tracked by Insider Monkey, worth close to $10.4 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also said goodbye to its stock, about $1.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cabot Corporation (NYSE:CBT) but similarly valued. We will take a look at RLJ Lodging Trust (NYSE:RLJ), ALLETE Inc (NYSE:ALE), Cree, Inc. (NASDAQ:CREE), and Matador Resources Co (NYSE:MTDR). This group of stocks’ market values match CBT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RLJ 20 330217 2
ALE 17 178339 2
CREE 13 215668 3
MTDR 10 153988 0
Average 15 219553 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $202 million in CBT’s case. RLJ Lodging Trust (NYSE:RLJ) is the most popular stock in this table. On the other hand Matador Resources Co (NYSE:MTDR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Cabot Corporation (NYSE:CBT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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