Hedge Funds Have Never Been More Bullish On CVR Energy, Inc. (CVI)

Is CVR Energy, Inc. (NYSE:CVI) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hedge fund interest in CVR Energy, Inc. (NYSE:CVI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Lazard Ltd (NYSE:LAZ), 2U Inc (NASDAQ:TWOU), and The Wendy’s Company (NASDAQ:WEN) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Carl Icahn as viking

Let’s take a glance at the latest hedge fund action surrounding CVR Energy, Inc. (NYSE:CVI).

What does the smart money think about CVR Energy, Inc. (NYSE:CVI)?

Heading into the second quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in CVI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CVI Positions

More specifically, Icahn Capital LP was the largest shareholder of CVR Energy, Inc. (NYSE:CVI), with a stake worth $2933.4 million reported as of the end of March. Trailing Icahn Capital LP was Renaissance Technologies, which amassed a stake valued at $55.4 million. Millennium Management, HBK Investments, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that CVR Energy, Inc. (NYSE:CVI) has experienced a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that slashed their entire stakes last quarter. At the top of the heap, D. E. Shaw’s D E Shaw dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $1.1 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $0.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to CVR Energy, Inc. (NYSE:CVI). We will take a look at Lazard Ltd (NYSE:LAZ), 2U Inc (NASDAQ:TWOU), The Wendy’s Company (NASDAQ:WEN), and Jabil Inc. (NYSE:JBL). This group of stocks’ market values are similar to CVI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAZ 16 580657 0
TWOU 19 155362 8
WEN 27 914054 1
JBL 20 275454 0
Average 20.5 481382 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $481 million. That figure was $3051 million in CVI’s case. The Wendy’s Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 16 bullish hedge fund positions. CVR Energy, Inc. (NYSE:CVI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CVI as the stock returned 8.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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