Is Sociedad Quimica y Minera (SQM) Going to Burn These Hedge Funds?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Sociedad Quimica y Minera (NYSE:SQM).

Sociedad Quimica y Minera (NYSE:SQM) investors should be aware of an increase in activity from the world’s largest hedge funds recently. SQM was in 13 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with SQM positions at the end of the previous quarter. Our calculations also showed that SQM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In today’s marketplace there are dozens of methods shareholders put to use to analyze their stock investments. A pair of the less utilized methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outperform their index-focused peers by a healthy margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Sociedad Quimica y Minera (NYSE:SQM).

How are hedge funds trading Sociedad Quimica y Minera (NYSE:SQM)?

At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 63% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in SQM a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Sociedad Quimica y Minera (NYSE:SQM) was held by Millennium Management, which reported holding $13.8 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $7.5 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Caxton Associates LP allocated the biggest weight to Sociedad Quimica y Minera (NYSE:SQM), around 0.15% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to SQM.

As one would reasonably expect, specific money managers have jumped into Sociedad Quimica y Minera (NYSE:SQM) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Sociedad Quimica y Minera (NYSE:SQM). Balyasny Asset Management had $7.5 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Donald Sussman’s Paloma Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Sociedad Quimica y Minera (NYSE:SQM). We will take a look at Herbalife Nutrition Ltd. (NYSE:HLF), Starwood Property Trust, Inc. (NYSE:STWD), Anaplan, Inc. (NYSE:PLAN), and FLIR Systems, Inc. (NASDAQ:FLIR). This group of stocks’ market caps match SQM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HLF 32 3311834 9
STWD 21 168906 1
PLAN 57 2187728 13
FLIR 32 202619 7
Average 35.5 1467772 7.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1468 million. That figure was $45 million in SQM’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Sociedad Quimica y Minera (NYSE:SQM) is even less popular than STWD. Hedge funds dodged a bullet by taking a bearish stance towards SQM. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately SQM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SQM investors were disappointed as the stock returned -28.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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