Is CLF A Good Stock To Buy Now According To Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Cleveland-Cliffs Inc (NYSE:CLF) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is CLF a good stock to buy now? Cleveland-Cliffs Inc (NYSE:CLF) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. CLF investors should be aware of a decrease in hedge fund interest of late. There were 25 hedge funds in our database with CLF holdings at the end of June. Our calculations also showed that CLF 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.

To the average investor there are a large number of methods investors put to use to assess stocks. Some of the most underrated methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can beat their index-focused peers by a healthy margin (see the details here).


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 we’re going to take a gander at the recent hedge fund action regarding Cleveland-Cliffs Inc (NYSE:CLF).

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

At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CLF over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is CLF A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in Cleveland-Cliffs Inc (NYSE:CLF), which was worth $111.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $60.7 million worth of shares. LMR Partners, Encompass Capital Advisors, and Citadel Investment Group 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 Encompass Capital Advisors allocated the biggest weight to Cleveland-Cliffs Inc (NYSE:CLF), around 2.62% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, designating 1.74 percent of its 13F equity portfolio to CLF.

Because Cleveland-Cliffs Inc (NYSE:CLF) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Mike Masters’s Masters Capital Management sold off the largest position of the 750 funds followed by Insider Monkey, valued at close to $5.5 million in stock. Richard Driehaus’s fund, Driehaus Capital, also dumped its stock, about $3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Cleveland-Cliffs Inc (NYSE:CLF). We will take a look at Antero Midstream Corp (NYSE:AM), BlackBerry Limited (NYSE:BB), Burning Rock Biotech Limited (NASDAQ:BNR), Avnet, Inc. (NYSE:AVT), TeleTech Holdings, Inc. (NASDAQ:TTEC), Insperity Inc (NYSE:NSP), and United States Cellular Corporation (NYSE:USM). This group of stocks’ market caps resemble CLF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AM 19 137564 5
BB 24 320931 2
BNR 11 211903 -7
AVT 31 543982 2
TTEC 14 42342 2
NSP 24 224616 -5
USM 13 92934 -3
Average 19.4 224896 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $315 million in CLF’s case. Avnet, Inc. (NYSE:AVT) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 11 bullish hedge fund positions. Cleveland-Cliffs Inc (NYSE:CLF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLF is 48.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CLF as the stock returned 104.2% since the end of Q3 (through 12/14) 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.