Hedge Funds Are Betting On Colfax Corporation (CFX)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Colfax Corporation (NYSE:CFX).

Colfax Corporation (NYSE:CFX) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that CFX isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Tom Gayner

Let’s go over the new hedge fund action surrounding Colfax Corporation (NYSE:CFX).

Hedge fund activity in Colfax Corporation (NYSE:CFX)

Heading into the fourth quarter of 2018, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the second quarter of 2018. On the other hand, there were a total of 19 hedge funds with a bullish position in CFX at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).


More specifically, Bares Capital Management was the largest shareholder of Colfax Corporation (NYSE:CFX), with a stake worth $108.8 million reported as of the end of September. Trailing Bares Capital Management was Diamond Hill Capital, which amassed a stake valued at $93.2 million. Wallace R. Weitz & Co., Markel Gayner Asset Management, and Cove Street Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, created the largest position in Colfax Corporation (NYSE:CFX). Point72 Asset Management had $11.9 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also made a $6.8 million investment in the stock during the quarter. The following funds were also among the new CFX investors: Gregg Moskowitz’s Interval Partners, Anand Parekh’s Alyeska Investment Group, and Alexander Mitchell’s Scopus Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Colfax Corporation (NYSE:CFX) but similarly valued. We will take a look at Olin Corporation (NYSE:OLN), Stitch Fix, Inc. (NASDAQ:SFIX), Ingevity Corporation (NYSE:NGVT), and Turquoise Hill Resources Ltd (NYSE:TRQ). All of these stocks’ market caps resemble CFX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OLN 27 982776 2
SFIX 21 279393 1
NGVT 19 148360 2
TRQ 18 1011545 0
Average 21.25 605519 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $386 million in CFX’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 18 bullish hedge fund positions. Colfax Corporation (NYSE:CFX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OLN might be a better candidate to consider a long position.

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