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Did Hedge Funds Make The Right Call On CNH Industrial NV (CNHI) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards CNH Industrial NV (NYSE:CNHI) and determine whether hedge funds skillfully traded this stock.

Is CNH Industrial NV (NYSE:CNHI) an outstanding investment right now? Money managers were buying. The number of long hedge fund positions rose by 1 lately. Our calculations also showed that CNHI 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). CNHI was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with CNHI holdings at the end of the previous quarter.

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

Today there are tons of formulas stock traders can use to assess publicly traded companies. A couple of the most underrated formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the market by a significant amount (see the details here).

Paul Singer ELLIOTT MANAGEMENT

Paul Singer of Elliott Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s view the recent hedge fund action encompassing CNH Industrial NV (NYSE:CNHI).

What does smart money think about CNH Industrial NV (NYSE:CNHI)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CNHI over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, GAMCO Investors was the largest shareholder of CNH Industrial NV (NYSE:CNHI), with a stake worth $61.2 million reported as of the end of September. Trailing GAMCO Investors was Arrowstreet Capital, which amassed a stake valued at $52.1 million. Southeastern Asset Management, Renaissance Technologies, and Elliott Investment 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 GAMCO Investors allocated the biggest weight to CNH Industrial NV (NYSE:CNHI), around 0.72% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 0.65 percent of its 13F equity portfolio to CNHI.

As industrywide interest jumped, specific money managers have been driving this bullishness. Renaissance Technologies, assembled the most valuable position in CNH Industrial NV (NYSE:CNHI). Renaissance Technologies had $5.8 million invested in the company at the end of the quarter. Paul Singer’s Elliott Investment Management also made a $5.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Greg Eisner’s Engineers Gate Manager, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks similar to CNH Industrial NV (NYSE:CNHI). These stocks are The Carlyle Group Inc. (NASDAQ:CG), Zillow Group Inc (NASDAQ:Z), Clarivate Plc (NYSE:CCC), and The Western Union Company (NYSE:WU). This group of stocks’ market values resemble CNHI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CG 16 232286 3
Z 37 1368913 0
CCC 28 818151 -17
WU 34 339513 5
Average 28.75 689716 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $690 million. That figure was $157 million in CNHI’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand The Carlyle Group Inc. (NASDAQ:CG) is the least popular one with only 16 bullish hedge fund positions. CNH Industrial NV (NYSE:CNHI) is not the least popular stock in this group but hedge fund interest is still below 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on CNHI as the stock returned 39% since the end of March and outperformed the market by an even larger margin.

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