Hedge Funds Started Selling CF Industries Holdings, Inc. (CF) Before The Coronavirus

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards CF Industries Holdings, Inc. (NYSE:CF).

CF Industries Holdings, Inc. (NYSE:CF) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Our calculations also showed that CF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In today’s marketplace there are numerous gauges market participants can use to appraise stocks. A duo of the most underrated gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top fund managers can trounce the S&P 500 by a healthy margin (see the details here).

Ricky Sandler of Eminence Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action regarding CF Industries Holdings, Inc. (NYSE:CF).

What have hedge funds been doing with CF Industries Holdings, Inc. (NYSE:CF)?

At Q4’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CF over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Eminence Capital held the most valuable stake in CF Industries Holdings, Inc. (NYSE:CF), which was worth $177.1 million at the end of the third quarter. On the second spot was Glendon Capital Management which amassed $136.2 million worth of shares. Platinum Asset Management, Adage Capital Management, and Renaissance Technologies 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 Glendon Capital Management allocated the biggest weight to CF Industries Holdings, Inc. (NYSE:CF), around 31.67% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, designating 8.09 percent of its 13F equity portfolio to CF.

Judging by the fact that CF Industries Holdings, Inc. (NYSE:CF) has faced falling interest from the smart money, logic holds that there is a sect of fund managers that elected to cut their positions entirely in the third quarter. Interestingly, Ray Dalio’s Bridgewater Associates dumped the largest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $11.2 million in stock. Robert Polak’s fund, Anchor Bolt Capital, also said goodbye to its stock, about $10.7 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CF Industries Holdings, Inc. (NYSE:CF) but similarly valued. We will take a look at Avantor, Inc. (NYSE:AVTR), Mylan N.V. (NASDAQ:MYL), Comerica Incorporated (NYSE:CMA), and Tradeweb Markets Inc. (NASDAQ:TW). All of these stocks’ market caps are similar to CF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVTR 28 833100 1
MYL 47 1849229 12
CMA 36 542380 4
TW 36 566781 -2
Average 36.75 947873 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $1004 million in CF’s case. Mylan N.V. (NASDAQ:MYL) is the most popular stock in this table. On the other hand Avantor, Inc. (NYSE:AVTR) is the least popular one with only 28 bullish hedge fund positions. CF Industries Holdings, Inc. (NYSE:CF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CF were disappointed as the stock returned -49.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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