Is The Mosaic Company (MOS) Going To Burn These Hedge Funds ?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on The Mosaic Company (NYSE:MOS) in order to identify whether reputable and successful top money managers continue to believe in its potential.

The Mosaic Company (NYSE:MOS) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that MOS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are several gauges market participants have at their disposal to size up their holdings. Two of the most underrated gauges 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 outclass the broader indices by a superb margin (see the details here).

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the fresh hedge fund action regarding The Mosaic Company (NYSE:MOS).

How are hedge funds trading The Mosaic Company (NYSE:MOS)?

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -39% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MOS over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

More specifically, Adage Capital Management was the largest shareholder of The Mosaic Company (NYSE:MOS), with a stake worth $242.1 million reported as of the end of September. Trailing Adage Capital Management was Citadel Investment Group, which amassed a stake valued at $206.9 million. D E Shaw, Slate Path Capital, and RR Partners 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 Slate Path Capital allocated the biggest weight to The Mosaic Company (NYSE:MOS), around 5.74% of its 13F portfolio. Harvest Capital Strategies is also relatively very bullish on the stock, designating 3.54 percent of its 13F equity portfolio to MOS.

Due to the fact that The Mosaic Company (NYSE:MOS) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of funds who sold off their positions entirely heading into Q4. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace sold off the largest stake of all the hedgies followed by Insider Monkey, valued at close to $22.2 million in stock, and Alan Fournier’s Pennant Capital Management was right behind this move, as the fund cut about $14.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 11 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Mosaic Company (NYSE:MOS) but similarly valued. These stocks are Universal Display Corporation (NASDAQ:OLED), Kohl’s Corporation (NYSE:KSS), Caesars Entertainment Corporation (NASDAQ:CZR), and ON Semiconductor Corporation (NASDAQ:ON). All of these stocks’ market caps are similar to MOS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OLED 23 231521 6
KSS 27 495049 -2
CZR 45 3756323 -3
ON 22 428054 -4
Average 29.25 1227737 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $683 million in MOS’s case. Caesars Entertainment Corporation (NASDAQ:CZR) is the most popular stock in this table. On the other hand ON Semiconductor Corporation (NASDAQ:ON) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks The Mosaic Company (NYSE:MOS) is even less popular than ON. Hedge funds dodged a bullet by taking a bearish stance towards MOS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MOS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MOS investors were disappointed as the stock returned -7.1% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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