Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Freeport-McMoRan Inc (NYSE:FCX).
Freeport-McMoRan Inc (NYSE:FCX) has seen an increase in activity from the world’s largest hedge funds recently, with 6 more hedge funds owning the stock on September 30 than did a quarter earlier. 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 Check Point Software Technologies Ltd. (NASDAQ:CHKP), W.W. Grainger, Inc. (NYSE:GWW), and Loews Corporation (NYSE:L) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, let’s take a glance at the recent action encompassing Freeport-McMoRan Inc (NYSE:FCX).
How have hedgies been trading Freeport-McMoRan Inc (NYSE:FCX)?
At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 20% jump from one quarter earlier, though ownership is still well below what it was a year earlier. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Carl Icahn’s Icahn Capital LP has the most valuable position in Freeport-McMoRan Inc (NYSE:FCX), worth close to $1.13 billion, amounting to 5.7% of its total 13F portfolio. Coming in second is Duquesne Capital, led by Stanley Druckenmiller, holding a $53 million position; the fund has 4.7% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Mario Gabelli’s GAMCO Investors, Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Investment Group.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Capital Growth Management, managed by Ken Heebner, established the biggest position in Freeport-McMoRan Inc (NYSE:FCX). Capital Growth Management had $20.1 million invested in the company at the end of the quarter. Christopher A. Winham’s Tide Point Capital also initiated a $19.5 million position during the quarter. The following funds were also among the new FCX investors: David Costen Haley’s HBK Investments, Citadel Investment Group, and Mike Masters’ Masters Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Freeport-McMoRan Inc (NYSE:FCX). We will take a look at Check Point Software Technologies Ltd. (NASDAQ:CHKP), W.W. Grainger, Inc. (NYSE:GWW), Loews Corporation (NYSE:L), and Magna International Inc. (USA) (NYSE:MGA). This group of stocks’ market caps are closest to FCX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $489 million. That figure was $1.55 billion in FCX’s case. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is the most popular stock in this table. On the other hand W.W. Grainger, Inc. (NYSE:GWW) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Freeport-McMoRan Inc (NYSE:FCX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.