Is CF A Good Stock To Buy According To Hedge Funds?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on CF Industries Holdings, Inc. (NYSE:CF).

Is CF a good stock to buy? Money managers were getting less optimistic. The number of bullish hedge fund bets were cut by 3 lately. CF Industries Holdings, Inc. (NYSE:CF) was in 34 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 50. Our calculations also showed that CF 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.

At the moment there are many metrics investors can use to size up publicly traded companies. Two of the most underrated metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a solid margin (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the key hedge fund action surrounding CF Industries Holdings, Inc. (NYSE:CF).

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

At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. By comparison, 42 hedge funds held shares or bullish call options in CF a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CF A Good Stock To Buy?

The largest stake in CF Industries Holdings, Inc. (NYSE:CF) was held by Glendon Capital Management, which reported holding $108.8 million worth of stock at the end of September. It was followed by Greenhaven Associates with a $104.4 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Adage Capital Management. 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 23.19% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, setting aside 3.63 percent of its 13F equity portfolio to CF.

Judging by the fact that CF Industries Holdings, Inc. (NYSE:CF) has witnessed falling interest from hedge fund managers, we can see that there exists a select few money managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, John W. Moon’s Moon Capital cut the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $9.3 million in stock, and Wayne Cooperman’s Cobalt Capital Management was right behind this move, as the fund said goodbye to about $4.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to CF Industries Holdings, Inc. (NYSE:CF). These stocks are Casey’s General Stores, Inc. (NASDAQ:CASY), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Tata Motors Limited (NYSE:TTM), Arch Coal Inc (NYSE:ACI), Lear Corporation (NYSE:LEA), JOYY Inc. (NASDAQ:YY), and Reliance Steel & Aluminum Co. (NYSE:RS). This group of stocks’ market valuations resemble CF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CASY 21 133183 -2
ACAD 41 2412028 -3
TTM 10 34390 1
ACI 26 2159342 -4
LEA 44 975002 3
YY 31 536084 3
RS 30 267133 3
Average 29 931023 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $931 million. That figure was $587 million in CF’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 10 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. Our overall hedge fund sentiment score for CF is 57.7. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on CF as the stock returned 23.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Cf Industries Holdings Inc. (NYSE:CF)

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