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Hedge Funds Have Never Been This Bullish On Constellium SE (CSTM)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Constellium SE (NYSE:CSTM).

Constellium SE (NYSE:CSTM) was in 43 hedge funds’ portfolios at the end of September. CSTM investors should be aware of an increase in hedge fund sentiment in recent months. There were 37 hedge funds in our database with CSTM positions at the end of the previous quarter. Our calculations also showed that CSTM isn’t among the 30 most popular stocks among hedge funds.

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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Richard Driehaus of Driehaus Capital

Richard Driehaus of Driehaus Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the fresh hedge fund action surrounding Constellium SE (NYSE:CSTM).

What does smart money think about Constellium SE (NYSE:CSTM)?

At Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in CSTM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

No of Hedge Funds with CSTM Positions

Of the funds tracked by Insider Monkey, Nut Tree Capital, managed by Jared Nussbaum, holds the largest position in Constellium SE (NYSE:CSTM). Nut Tree Capital has a $46.2 million position in the stock, comprising 14.2% of its 13F portfolio. Coming in second is Peter S. Park of Park West Asset Management, with a $29.4 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish consist of Mark Kingdon’s Kingdon Capital, David Rosen’s Rubric Capital Management and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Constellium SE (NYSE:CSTM), around 25.08% of its portfolio. SkyTop Capital Management is also relatively very bullish on the stock, designating 15.61 percent of its 13F equity portfolio to CSTM.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, created the most outsized position in Constellium SE (NYSE:CSTM). Driehaus Capital had $25.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $5.1 million position during the quarter. The other funds with brand new CSTM positions are Minhua Zhang’s Weld Capital Management, Curtis Schenker and Craig Effron’s Scoggin, and Nick Thakore’s Diametric Capital.

Let’s also examine hedge fund activity in other stocks similar to Constellium SE (NYSE:CSTM). We will take a look at iRobot Corporation (NASDAQ:IRBT), Trinseo S.A. (NYSE:TSE), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), and FGL Holdings (NYSE:FG). All of these stocks’ market caps are closest to CSTM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRBT 11 52517 2
TSE 13 85449 -10
EPAY 19 85411 3
FG 23 175870 -1
Average 16.5 99812 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $412 million in CSTM’s case. FGL Holdings (NYSE:FG) is the most popular stock in this table. On the other hand iRobot Corporation (NASDAQ:IRBT) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Constellium SE (NYSE:CSTM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on CSTM, though not to the same extent, as the stock returned 7.5% during the fourth quarter (through 11/22) and outperformed the market as well.

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

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