Is Compass Minerals International, Inc. (CMP) A Good Stock To Buy?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Compass Minerals International, Inc. (NYSE:CMP).

Is Compass Minerals International, Inc. (NYSE:CMP) a buy right now? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions fell by 1 lately. Our calculations also showed that CMP isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.

Chuck Royce

Let’s review the fresh hedge fund action encompassing Compass Minerals International, Inc. (NYSE:CMP).

Hedge fund activity in Compass Minerals International, Inc. (NYSE:CMP)

Heading into the fourth quarter of 2018, 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. Below, you can check out the change in hedge fund sentiment towards CMP over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Of the funds tracked by Insider Monkey, Southpoint Capital Advisors, managed by John Smith Clark, holds the number one position in Compass Minerals International, Inc. (NYSE:CMP). Southpoint Capital Advisors has a $35.7 million position in the stock, comprising 1.4% of its 13F portfolio. On Southpoint Capital Advisors’s heels is Cove Street Capital, managed by Jeffrey Bronchick, which holds a $26.4 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Chuck Royce’s Royce & Associates, Malcolm Fairbairn’s Ascend Capital and Wallace Weitz’s Wallace R. Weitz & Co..

Because Compass Minerals International, Inc. (NYSE:CMP) has faced falling interest from the smart money, it’s easy to see that there is a sect of money managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Joseph A. Jolson’s Harvest Capital Strategies said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling about $3.3 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $2.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Compass Minerals International, Inc. (NYSE:CMP). These stocks are Dominion Energy Midstream Partners, LP (NYSE:DM), ExlService Holdings, Inc. (NASDAQ:EXLS), Independent Bank Corp (NASDAQ:INDB), and iRhythm Technologies, Inc. (NASDAQ:IRTC). All of these stocks’ market caps are similar to CMP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DM 4 12285 3
EXLS 10 58943 -1
INDB 7 13638 1
IRTC 23 304892 5
Average 11 97440 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $117 million in CMP’s case. iRhythm Technologies, Inc. (NASDAQ:IRTC) is the most popular stock in this table. On the other hand Dominion Energy Midstream Partners, LP (NYSE:DM) is the least popular one with only 4 bullish hedge fund positions. Compass Minerals International, Inc. (NYSE:CMP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IRTC might be a better candidate to consider a long position.

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