Hedge Funds Took Refuge In CSX Corporation (CSX)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded CSX Corporation (NASDAQ:CSX) based on those filings.

Is CSX Corporation (NASDAQ:CSX) a safe stock to buy now? Prominent investors are in an optimistic mood. The number of long hedge fund bets rose by 11 in recent months. Our calculations also showed that CSX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to review the recent hedge fund action encompassing CSX Corporation (NASDAQ:CSX).

What have hedge funds been doing with CSX Corporation (NASDAQ:CSX)?

Heading into the second quarter of 2020, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CSX over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Soroban Capital Partners held the most valuable stake in CSX Corporation (NASDAQ:CSX), which was worth $840.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $290 million worth of shares. Steadfast Capital Management, Fisher Asset 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 Soroban Capital Partners allocated the biggest weight to CSX Corporation (NASDAQ:CSX), around 15.41% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, earmarking 6.42 percent of its 13F equity portfolio to CSX.

Now, key money managers have jumped into CSX Corporation (NASDAQ:CSX) headfirst. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, initiated the largest position in CSX Corporation (NASDAQ:CSX). Palestra Capital Management had $177.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $82.6 million investment in the stock during the quarter. The following funds were also among the new CSX investors: Andreas Halvorsen’s Viking Global, Robert Bishop’s Impala Asset Management, and Alexander Mitchell’s Scopus Asset Management.

Let’s check out hedge fund activity in other stocks similar to CSX Corporation (NASDAQ:CSX). These stocks are Air Products & Chemicals, Inc. (NYSE:APD), Shopify Inc (NYSE:SHOP), Kimberly Clark Corporation (NYSE:KMB), and Marsh & McLennan Companies, Inc. (NYSE:MMC). All of these stocks’ market caps are closest to CSX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APD 41 352215 -13
SHOP 43 2892013 13
KMB 46 1173309 9
MMC 37 668435 6
Average 41.75 1271493 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1271 million. That figure was $2811 million in CSX’s case. Kimberly Clark Corporation (NYSE:KMB) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks CSX Corporation (NASDAQ:CSX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on CSX, though not to the same extent, as the stock returned 19.6% in Q2 (through May 22nd) and outperformed the market as well.

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