Hedge Funds Are Betting Big On These Sliding Stocks

While hedge fund ownership in Kinder Morgan (NYSE:KMI) fell by three funds to 63 by June 30, the holdings of the funds with positions took a giant leap in value, to $2.42 billion from $1.59 billion, despite shares sliding by nearly 10% during the quarter, so funds were bullishly adding shares on their weakness. The moves have yet to pay off, as Kinder Morgan (NYSE:KMI) is down even further so far in the third quarter, by more than 11%. The stock did get a boost on Friday, as it was added to Goldman Sachs‘ ‘Conviction Buy’ list, with the firm holding a $48 price target on the stock, which is currently trading at less than $34. It’s not only funds that have buying up shares of Kinder Morgan of late; company insiders have also been gobbling up shares. Israel Englander’s Millennium Management was one of the funds we track that was bullish on the stock in the second quarter, buying 584,758 shares.

Let’s check out CSX Corporation (NYSE:CSX) now, which is down by over 9% in the third quarter and by more than 20% since early May. Despite the second quarter dip in share price, the value of holdings in the stock among the funds we track leapt by 58% to $1.42 billion. The share price drop also comes despite a record earnings performance for the company in the second quarter, which seemed to vindicate hedge funds for their bullishness (they were also bullish in the first quarter). Nonetheless, the stock has some work to do to reward its backers. Stephen Mandel’s Lone Pine Capital and Dimitry Balyasny’s Balyasny Asset Management were among the funds that were bullish on CSX Corporation (NYSE:CSX) in the second quarter. The former initiated a $68.18 million position, while the latter bumped its holding up by 69% to 2.03 million shares.

Lastly we come to Mosaic Co (NYSE:MOS), which counted Adage Capital Partners among its backers in the second quarter, as the Phill Gross and Robert Atchinson-managed fund added 1.9 million shares to its holding, lifting it to 3.98 million shares. Overall, hedge fund ownership increased to 47 from 40 during the second quarter, and aggregate holdings increased in value to $931 million from $538 million during a quarter in which shares rose only marginally in value. They have declined by 7.5% in the third quarter. Another agricultural inputs company, which counts Monsanto as one of its competitors, Mosaic Co (NYSE:MOS) has a P/E of just 12.8 and a Forward P/E of 11.3, while paying a quarterly dividend that offers a yield of 2.54%.

Disclosure: None