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Did Hedge Funds Make The Right Call On The Mosaic Company (MOS) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Mosaic Company (NYSE:MOS) and determine whether hedge funds had an edge regarding this stock.

The Mosaic Company (NYSE:MOS) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 29 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as 51job, Inc. (NASDAQ:JOBS), Teck Resources Ltd (NYSE:TECK), and Churchill Downs Incorporated (NASDAQ:CHDN) to gather more data points. Our calculations also showed that MOS 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.

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.

Steven Cohen

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 analyze the key hedge fund action encompassing The Mosaic Company (NYSE:MOS).

Hedge fund activity in The Mosaic Company (NYSE:MOS)

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in MOS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MOS A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in The Mosaic Company (NYSE:MOS). Adage Capital Management has a $123.3 million position in the stock, comprising 0.4% of its 13F portfolio. On Adage Capital Management’s heels is Citadel Investment Group, led by Ken Griffin, holding a $93.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism comprise David Greenspan’s Slate Path Capital, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to The Mosaic Company (NYSE:MOS), around 5.43% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 2.79 percent of its 13F equity portfolio to MOS.

Because The Mosaic Company (NYSE:MOS) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that elected to cut their positions entirely last quarter. Interestingly,  Renaissance Technologies cut the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $19 million in stock, and Brian J. Higgins’s King Street Capital was right behind this move, as the fund sold off about $15.1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Mosaic Company (NYSE:MOS) but similarly valued. These stocks are 51job, Inc. (NASDAQ:JOBS), Teck Resources Ltd (NYSE:TECK), Churchill Downs Incorporated (NASDAQ:CHDN), and Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC). This group of stocks’ market valuations are similar to MOS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JOBS 9 18622 1
TECK 24 259343 -6
CHDN 31 444952 -1
TKC 3 40169 -4
Average 16.75 190772 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $387 million in MOS’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 3 bullish hedge fund positions. The Mosaic Company (NYSE:MOS) 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. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately MOS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MOS were disappointed as the stock returned 16.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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