We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cemex SAB de CV (NYSE:CX) and determine whether hedge funds skillfully traded this stock.
Cemex SAB de CV (NYSE:CX) was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. CX has experienced a decrease in activity from the world’s largest hedge funds of late. There were 13 hedge funds in our database with CX positions at the end of the previous quarter. Our calculations also showed that CX 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.
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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the key hedge fund action regarding Cemex SAB de CV (NYSE:CX).
How have hedgies been trading Cemex SAB de CV (NYSE:CX)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in CX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Cemex SAB de CV (NYSE:CX), with a stake worth $32.9 million reported as of the end of September. Trailing Adage Capital Management was Oaktree Capital Management, which amassed a stake valued at $32.2 million. Hosking Partners, Indus Capital, and Fisher Asset Management 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 MIC Capital Partners allocated the biggest weight to Cemex SAB de CV (NYSE:CX), around 2.13% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 0.91 percent of its 13F equity portfolio to CX.
Seeing as Cemex SAB de CV (NYSE:CX) has faced falling interest from the aggregate hedge fund industry, we can see that there is a sect of fund managers that decided to sell off their entire stakes by the end of the first quarter. It’s worth mentioning that John Osterweis’s Osterweis Capital Management cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $71.4 million in stock. John Osterweis’s fund, Osterweis Capital Management, also said goodbye to its stock, about $21.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Cemex SAB de CV (NYSE:CX). These stocks are L Brands Inc (NYSE:LB), Pure Storage, Inc. (NYSE:PSTG), FirstService Corporation (NASDAQ:FSV), and Silgan Holdings Inc. (NASDAQ:SLGN). All of these stocks’ market caps resemble CX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $99 million in CX’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Cemex SAB de CV (NYSE:CX) is even less popular than FSV. Hedge funds clearly dropped the ball on CX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CX as the stock returned 35.8% in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.