Hedge Funds Piled Into Freeport-McMoRan Inc. (FCX) At The Wrong Time

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Freeport-McMoRan Inc. (NYSE:FCX).

Is Freeport-McMoRan Inc. (NYSE:FCX) the right investment to pursue these days? Prominent investors were getting more bullish. The number of bullish hedge fund bets advanced by 8 lately. Freeport-McMoRan Inc. (NYSE:FCX) was in 76 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 68. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FCX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to go over the key hedge fund action regarding Freeport-McMoRan Inc. (NYSE:FCX).

Do Hedge Funds Think FCX Is A Good Stock To Buy Now?

At Q2’s end, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the first quarter of 2020. On the other hand, there were a total of 53 hedge funds with a bullish position in FCX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Freeport-McMoRan Inc. (NYSE:FCX), which was worth $1692.2 million at the end of the second quarter. On the second spot was Diamond Hill Capital which amassed $425.3 million worth of shares. Lansdowne Partners, Duquesne Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kadensa Capital allocated the biggest weight to Freeport-McMoRan Inc. (NYSE:FCX), around 14.97% of its 13F portfolio. Napier Park Global Capital is also relatively very bullish on the stock, earmarking 12.12 percent of its 13F equity portfolio to FCX.

As aggregate interest increased, some big names were leading the bulls’ herd. Diamond Hill Capital, managed by Matthew Stadelman, created the most outsized position in Freeport-McMoRan Inc. (NYSE:FCX). Diamond Hill Capital had $425.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $22.3 million position during the quarter. The other funds with brand new FCX positions are John Smith Clark’s Southpoint Capital Advisors, Ryan Caldwell’s Chiron Investment Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Freeport-McMoRan Inc. (NYSE:FCX) but similarly valued. These stocks are Ambev SA (NYSE:ABEV), BioNTech SE (NASDAQ:BNTX), Aon plc (NYSE:AON), IDEXX Laboratories, Inc. (NASDAQ:IDXX), General Dynamics Corporation (NYSE:GD), Takeda Pharmaceutical Company Limited (NYSE:TAK), and Enterprise Products Partners L.P. (NYSE:EPD). This group of stocks’ market caps match FCX’s market cap.

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As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $2803 million. That figure was $3870 million in FCX’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Ambev SA (NYSE:ABEV) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Freeport-McMoRan Inc. (NYSE:FCX) is more popular among hedge funds. Our overall hedge fund sentiment score for FCX is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.1% in 2021 through September 20th and still beat the market by 6.9 percentage points. Unfortunately FCX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FCX were disappointed as the stock returned -15.8% since the end of the second quarter (through 9/20) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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