Is CENX A Good Stock To Buy Now?

Is Century Aluminum Co (NASDAQ:CENX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is CENX a good stock to buy now? Century Aluminum Co (NASDAQ:CENX) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 20. CENX shareholders have witnessed a decrease in hedge fund sentiment of late. There were 12 hedge funds in our database with CENX holdings at the end of June. Our calculations also showed that CENX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

With all of this in mind we’re going to take a glance at the recent hedge fund action encompassing Century Aluminum Co (NASDAQ:CENX).

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

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in CENX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Century Aluminum Co (NASDAQ:CENX), which was worth $18 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $7.1 million worth of shares. Impala Asset Management, Renaissance Technologies, and D E Shaw 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 Impala Asset Management allocated the biggest weight to Century Aluminum Co (NASDAQ:CENX), around 0.56% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to CENX.

Judging by the fact that Century Aluminum Co (NASDAQ:CENX) has faced falling interest from hedge fund managers, it’s easy to see that there is a sect of hedgies that slashed their positions entirely heading into Q4. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $3.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $0.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Century Aluminum Co (NASDAQ:CENX). These stocks are Denny’s Corporation (NASDAQ:DENN), Ebix Inc (NASDAQ:EBIX), Lumber Liquidators Holdings Inc (NYSE:LL), G-III Apparel Group, Ltd. (NASDAQ:GIII), Albireo Pharma, Inc. (NASDAQ:ALBO), Transportadora de Gas del Sur SA (NYSE:TGS), and Wabash National Corporation (NYSE:WNC). All of these stocks’ market caps are similar to CENX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DENN 20 65004 -3
EBIX 13 50750 -4
LL 14 61499 5
GIII 16 45316 6
ALBO 22 220205 10
TGS 6 9871 1
WNC 18 58904 3
Average 15.6 73078 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $36 million in CENX’s case. Albireo Pharma, Inc. (NASDAQ:ALBO) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (NYSE:TGS) is the least popular one with only 6 bullish hedge fund positions. Century Aluminum Co (NASDAQ:CENX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CENX is 36.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CENX as the stock returned 69.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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