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Hedge Funds Dropped The Ball On CME Group Inc (CME)

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards CME Group Inc (NASDAQ:CME).

CME Group Inc (NASDAQ:CME) was in 39 hedge funds’ portfolios at the end of June. CME has experienced a decrease in hedge fund sentiment recently. There were 42 hedge funds in our database with CME positions at the end of the previous quarter. Overall hedge fund sentiment towards the stock currently sits at its multi-year low. Our calculations also showed that CME isn’t among the 30 most popular stocks among hedge funds (see the video below).

5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Von Mueffling - Cantillon Capital Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the fresh hedge fund action encompassing CME Group Inc (NASDAQ:CME).

How are hedge funds trading CME Group Inc (NASDAQ:CME)?

At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 48 hedge funds with a bullish position in CME a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with CME Positions

The largest stake in CME Group Inc (NASDAQ:CME) was held by Cantillon Capital Management, which reported holding $366.5 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $266 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Intermede Investment Partners.

Judging by the fact that CME Group Inc (NASDAQ:CME) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that slashed their entire stakes last quarter. Intriguingly, Peter Seuss’s Prana Capital Management dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising about $24 million in stock. Daniel Johnson’s fund, Gillson Capital, also dropped its stock, about $9.5 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to CME Group Inc (NASDAQ:CME). These stocks are CVS Health Corporation (NYSE:CVS), Automatic Data Processing, Inc. (NASDAQ:ADP), VMware, Inc. (NYSE:VMW), and Intuit Inc. (NASDAQ:INTU). This group of stocks’ market caps resemble CME’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVS 55 985752 -6
ADP 43 2736833 4
VMW 34 1324960 2
INTU 46 2203004 4
Average 44.5 1812637 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.5 hedge funds with bullish positions and the average amount invested in these stocks was $1813 million. That figure was $1663 million in CME’s case. CVS Health Corporation (NYSE:CVS) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 34 bullish hedge fund positions. CME Group Inc (NASDAQ:CME) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CME as the stock returned 9.2% during the same time frame and outperformed the market by an even larger margin.

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

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