We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards United States Steel Corporation (NYSE:X), and what that likely means for the prospects of the company and its stock.
United States Steel Corporation (NYSE:X) has seen an increase in support from the world’s most successful money managers lately. United States Steel was in 35 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with United States Steel positions at the end of the previous quarter. 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 Blackstone Mortgage Trust Inc (NYSE:BXMT), Columbia Property Trust Inc (NYSE:CXP), and Terex Corporation (NYSE:TEX) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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How are hedge funds trading United States Steel Corporation (NYSE:X)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, up by 35% from one quarter earlier. By comparison, just 22 hedge funds held shares or bullish call options in United States Steel heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Citadel Investment Group, led by Ken Griffin, holds the biggest position in United States Steel Corporation (NYSE:X). Citadel Investment Group has an $86.1 million position in the stock. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $76.6 million position. Some other hedge funds and institutional investors that are bullish contain Jonathan Barrett and Paul Segal’s Luminus Management, Jim Simons’ Renaissance Technologies, and David Einhorn’s Greenlight Capital. We should note that Luminus Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, some big names have been driving this bullishness. Greenlight Capital made a $58.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Zach Schreiber’s Point State Capital, Citadel Investment Group, and David Costen Haley’s HBK Investments.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as United States Steel Corporation (NYSE:X) but similarly valued. We will take a look at Blackstone Mortgage Trust Inc (NYSE:BXMT), Columbia Property Trust Inc (NYSE:CXP), Terex Corporation (NYSE:TEX), and Clean Harbors Inc (NYSE:CLH). This group of stocks’ market valuations are closest to United States Steel’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BXMT | 17 | 273906 | -1 |
| CXP | 11 | 84467 | -1 |
| TEX | 25 | 357338 | -6 |
| CLH | 13 | 175394 | -3 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $788 million in United States Steel’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks United States Steel Corporation (NYSE:X) 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
