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 The Chemours Company (NYSE:CC) and determine whether hedge funds skillfully traded this stock.
Is The Chemours Company (NYSE:CC) a buy here? The smart money was in an optimistic mood. The number of bullish hedge fund positions improved by 3 lately. Our calculations also showed that CC 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). CC was in 32 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with CC positions at the end of the previous 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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Petry of Sessa Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the recent hedge fund action encompassing The Chemours Company (NYSE:CC).
What does smart money think about The Chemours Company (NYSE:CC)?
Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in CC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Sessa Capital was the largest shareholder of The Chemours Company (NYSE:CC), with a stake worth $89.4 million reported as of the end of September. Trailing Sessa Capital was Greenlight Capital, which amassed a stake valued at $43.3 million. Miller Value Partners, Luminus Management, and Arrowstreet Capital 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 10.95% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, setting aside 6.17 percent of its 13F equity portfolio to CC.
As aggregate interest increased, some big names were leading the bulls’ herd. Luminus Management, managed by Jonathan Barrett and Paul Segal, initiated the most outsized position in The Chemours Company (NYSE:CC). Luminus Management had $21.6 million invested in the company at the end of the quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital also initiated a $7.7 million position during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Sahm Adrangi’s Kerrisdale Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Chemours Company (NYSE:CC) but similarly valued. These stocks are Monro Inc (NASDAQ:MNRO), LivePerson, Inc. (NASDAQ:LPSN), M.D.C. Holdings, Inc. (NYSE:MDC), and First Merchants Corporation (NASDAQ:FRME). This group of stocks’ market caps are closest to CC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MNRO | 14 | 87142 | -4 |
| LPSN | 15 | 96549 | -8 |
| MDC | 14 | 61401 | -3 |
| FRME | 12 | 64591 | 0 |
| Average | 13.75 | 77421 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $239 million in CC’s case. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand First Merchants Corporation (NASDAQ:FRME) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks The Chemours Company (NYSE:CC) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CC as the stock returned 76.9% in Q2 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.
Follow Chemours Co (NYSE:CC)
Follow Chemours Co (NYSE:CC)
Disclosure: None. This article was originally published at Insider Monkey.
