Is CF Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is CF Industries Holdings, Inc. (NYSE:CF), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is CF stock a buy or sell? Investors who are in the know were buying. The number of long hedge fund bets inched up by 8 recently. CF Industries Holdings, Inc. (NYSE:CF) was in 42 hedge funds’ portfolios at the end of the fourth 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 Q4 rankings). There were 34 hedge funds in our database with CF positions at the end of the third quarter.

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 124 percentage points since March 2017 (see the details here).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind let’s take a look at the recent hedge fund action regarding CF Industries Holdings, Inc. (NYSE:CF).

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

Heading into the first quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in CF over the last 22 quarters. So, let’s see 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?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Greenhaven Associates, managed by Edgar Wachenheim, holds the number one position in CF Industries Holdings, Inc. (NYSE:CF). Greenhaven Associates has a $131.5 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is Glendon Capital Management, managed by Matthew Barrett, which holds a $129.5 million position; 21% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish encompass D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium 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 21.01% of its 13F portfolio. Cobalt Capital Management is also relatively very bullish on the stock, earmarking 3.83 percent of its 13F equity portfolio to CF.

Now, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in CF Industries Holdings, Inc. (NYSE:CF). Balyasny Asset Management had $26.6 million invested in the company at the end of the quarter. Ben Jacobs’s Anomaly Capital Management also initiated a $23.4 million position during the quarter. The other funds with brand new CF positions are Wayne Cooperman’s Cobalt Capital Management, Steve Cohen’s Point72 Asset Management, and Joe Milano’s Greenhouse Funds.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CF Industries Holdings, Inc. (NYSE:CF) but similarly valued. We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), Athene Holding Ltd. (NYSE:ATH), Tata Motors Limited (NYSE:TTM), Vereit Inc (NYSE:VER), Omega Healthcare Investors Inc (NYSE:OHI), Encompass Health Corporation (NYSE:EHC), and Companhia Siderurgica Nacional (NYSE:SID). All of these stocks’ market caps are closest to CF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPLA 43 1162142 6
ATH 36 1146379 5
TTM 7 40441 -3
VER 23 683956 5
OHI 15 101266 -4
EHC 35 758170 3
SID 9 43048 2
Average 24 562200 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $835 million in CF’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 7 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 83.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on CF as the stock returned 25.3% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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