In this article we will analyze whether Cummins Inc. (NYSE:CMI) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is CMI stock a buy or sell? Cummins Inc. (NYSE:CMI) has seen a decrease in activity from the world’s largest hedge funds of late. Cummins Inc. (NYSE:CMI) was in 45 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 49. There were 49 hedge funds in our database with CMI positions at the end of the third quarter. Our calculations also showed that CMI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are several tools stock traders put to use to appraise publicly traded companies. Some of the best tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the S&P 500 by a significant amount (see the details here).
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Do Hedge Funds Think CMI Is A Good Stock To Buy Now?
At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CMI over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Cummins Inc. (NYSE:CMI), with a stake worth $222 million reported as of the end of December. Trailing AQR Capital Management was Millennium Management, which amassed a stake valued at $113 million. GLG Partners, Duquesne Capital, and Driehaus Capital 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 Socorro Asset Management allocated the biggest weight to Cummins Inc. (NYSE:CMI), around 3.85% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, dishing out 2.2 percent of its 13F equity portfolio to CMI.
Because Cummins Inc. (NYSE:CMI) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their entire stakes in the fourth quarter. Interestingly, Anand Parekh’s Alyeska Investment Group dumped the biggest investment of all the hedgies tracked by Insider Monkey, valued at close to $41.1 million in stock. Louis Bacon’s fund, Moore Global Investments, also dropped its stock, about $25.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the fourth quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cummins Inc. (NYSE:CMI) but similarly valued. We will take a look at Paychex, Inc. (NASDAQ:PAYX), STMicroelectronics N.V. (NYSE:STM), CRH PLC (NYSE:CRH), The Allstate Corporation (NYSE:ALL), V.F. Corporation (NYSE:VFC), Okta, Inc. (NASDAQ:OKTA), and Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA). This group of stocks’ market caps are similar to CMI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $829 million in CMI’s case. Okta, Inc. (NASDAQ:OKTA) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. Cummins Inc. (NYSE:CMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMI is 63.7. 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 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 CMI as the stock returned 17.7% 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.