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Hedge Funds Were Getting Burned By The Chemours Company (CC) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether The Chemours Company (NYSE:CC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

The Chemours Company (NYSE:CC) has seen a decrease in support from the world’s most elite money managers of late. CC was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 30 hedge funds in our database with CC holdings at the end of the previous quarter. Our calculations also showed that CC 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).

To most shareholders, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, We hone in on the top tier of this club, about 850 funds. It is estimated that this group of investors oversee the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their unrivaled picks, Insider Monkey has uncovered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

John Petry Sessa Capital

John Petry of Sessa 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. Keeping this in mind we’re going to take a gander at the key hedge fund action surrounding The Chemours Company (NYSE:CC).

What have hedge funds been doing with The Chemours Company (NYSE:CC)?

At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in CC over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in The Chemours Company (NYSE:CC) was held by Sessa Capital, which reported holding $130.4 million worth of stock at the end of September. It was followed by Greenlight Capital with a $123.2 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Moore Global Investments. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to The Chemours Company (NYSE:CC), around 13.41% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, dishing out 9.14 percent of its 13F equity portfolio to CC.

Since The Chemours Company (NYSE:CC) has experienced falling interest from hedge fund managers, we can see that there is a sect of funds that elected to cut their full holdings heading into Q4. Interestingly, David Harding’s Winton Capital Management sold off the biggest position of the 750 funds followed by Insider Monkey, worth about $9.7 million in stock. Bernard Selz’s fund, Selz Capital, also cut its stock, about $8.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Chemours Company (NYSE:CC) but similarly valued. We will take a look at Itau CorpBanca (NYSE:ITCB), Acadia Healthcare Company Inc (NASDAQ:ACHC), Methanex Corporation (NASDAQ:MEOH), and Builders FirstSource, Inc. (NASDAQ:BLDR). This group of stocks’ market valuations are similar to CC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITCB 1 2800 0
ACHC 28 655188 6
MEOH 16 195583 0
BLDR 40 535140 1
Average 21.25 347178 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $332 million in CC’s case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. The Chemours Company (NYSE:CC) 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CC were disappointed as the stock returned -38.9% 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.

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