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Cabot Corporation (CBT): Hedge Funds Taking Some Chips Off The Table

In this article we will check out the progression of hedge fund sentiment towards Cabot Corporation (NYSE:CBT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Cabot Corporation (NYSE:CBT) investors should pay attention to a decrease in hedge fund sentiment of late. CBT was in 23 hedge funds’ portfolios at the end of March. There were 29 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 (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

To the average investor there are tons of tools market participants have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top fund managers can beat the broader indices by a very impressive margin (see the details here).

Steven Cohen

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the key hedge fund action encompassing Cabot Corporation (NYSE:CBT).

What have hedge funds been doing with Cabot Corporation (NYSE:CBT)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CBT over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Cabot Corporation (NYSE:CBT), which was worth $25.4 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $5.9 million worth of shares. GLG Partners, Citadel Investment Group, and Millennium Management 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 Invenomic Capital Management allocated the biggest weight to Cabot Corporation (NYSE:CBT), around 0.75% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.5 percent of its 13F equity portfolio to CBT.

Since Cabot Corporation (NYSE:CBT) has witnessed a decline in interest from the smart money, it’s easy to see that there were a few funds who sold off their full holdings heading into Q4. It’s worth mentioning that Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dropped the largest investment of the 750 funds monitored by Insider Monkey, comprising about $31.7 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Cabot Corporation (NYSE:CBT). These stocks are Insight Enterprises, Inc. (NASDAQ:NSIT), Holly Energy Partners, L.P. (NYSE:HEP), Taylor Morrison Home Corp (NYSE:TMHC), and AssetMark Financial Holdings, Inc. (NYSE:AMK). This group of stocks’ market valuations are similar to CBT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSIT 13 65128 -5
HEP 6 6214 1
TMHC 28 214982 0
AMK 4 25078 -2
Average 12.75 77851 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $58 million in CBT’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 4 bullish hedge fund positions. Cabot Corporation (NYSE:CBT) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on CBT as the stock returned 53% in Q2 (through June 10th) 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.