Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CVR Energy, Inc. (NYSE:CVI).
Is CVI a good stock to buy now? CVR Energy, Inc. (NYSE:CVI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of September. Our calculations also showed that CVI 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as National Research Corporation (NASDAQ:NRC), LexinFintech Holdings Ltd. (NASDAQ:LX), and Fluor Corporation (NYSE:FLR) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 66 percentage points since March 2017 (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.
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. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding CVR Energy, Inc. (NYSE:CVI).
Do Hedge Funds Think CVI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVI over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CVR Energy, Inc. (NYSE:CVI) was held by Icahn Capital LP, which reported holding $881.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $22.4 million position. Other investors bullish on the company included Encompass Capital Advisors, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to CVR Energy, Inc. (NYSE:CVI), around 5.07% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, setting aside 0.95 percent of its 13F equity portfolio to CVI.
Judging by the fact that CVR Energy, Inc. (NYSE:CVI) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dumped the biggest stake of all the hedgies followed by Insider Monkey, totaling close to $2.8 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CVR Energy, Inc. (NYSE:CVI) but similarly valued. We will take a look at National Research Corporation (NASDAQ:NRC), LexinFintech Holdings Ltd. (NASDAQ:LX), Fluor Corporation (NYSE:FLR), Compass Diversified Holdings (NYSE:CODI), PDC Energy Inc (NASDAQ:PDCE), First Midwest Bancorp Inc (NASDAQ:FMBI), and HeadHunter Group PLC (NASDAQ:HHR). This group of stocks’ market caps resemble CVI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $937 million in CVI’s case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Compass Diversified Holdings (NYSE:CODI) is the least popular one with only 3 bullish hedge fund positions. CVR Energy, Inc. (NYSE:CVI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVI is 58.1. 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 CVI as the stock returned 21.9% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.