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This Metric Says You Are Smart to Sell CVR Energy, Inc. (CVI)

CVR Energy, Inc. (NYSE:CVI) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months.

In the 21st century investor’s toolkit, there are dozens of gauges shareholders can use to analyze publicly traded companies. Two of the most underrated are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best investment managers can beat the S&P 500 by a very impressive margin (see just how much).

CVR Energy, Inc. (NYSE:CVI)

Equally as important, bullish insider trading sentiment is a second way to break down the financial markets. Obviously, there are lots of stimuli for a corporate insider to downsize shares of his or her company, but only one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the recent action surrounding CVR Energy, Inc. (NYSE:CVI).

How are hedge funds trading CVR Energy, Inc. (NYSE:CVI)?

Heading into 2013, a total of 16 of the hedge funds we track were bullish in this stock, a change of -6% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully.

When looking at the hedgies we track, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in CVR Energy, Inc. (NYSE:CVI). Icahn Capital LP has a $3.474 billion position in the stock, comprising 27% of its 13F portfolio. On Icahn Capital LP’s heels is Jim Simons of Renaissance Technologies, with a $33 million position; 0% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish include D. E. Shaw’s D E Shaw, Sander Gerber’s Hudson Bay Capital Management and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).

Seeing as CVR Energy, Inc. (NYSE:CVI) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds that elected to cut their positions entirely in Q4. At the top of the heap, SAC Subsidiary’s Sigma Capital Management dropped the biggest position of all the hedgies we track, valued at about $12 million in call options, and it also made the second largest bearish transaction, selling about $4 million worth of actual stock in the process. These moves are important to note, as aggregate hedge fund interest fell by 1 fund in Q4.

What have insiders been doing with CVR Energy, Inc. (NYSE:CVI)?

Insider buying is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, CVR Energy, Inc. (NYSE:CVI) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Some of CVR’s comparable peers include Western Refining, Inc. (NYSE:WNR) and PBF Energy Inc (NYSE:PBF), which have each seen at least one insider purchase over the past six months. Sinopec Shanghai Petrochemical Co. (ADR) (NYSE:SHI) and InterOil Corporation (USA) (NYSE:IOC) are also included in this analysis. It’s worth noting that of this group, only Western Refining has seen insider selling behavior in the last 180-day period.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Western Refining, Inc. (NYSE:WNR) 19 1 7
Sinopec Shanghai Petrochemical Co. (ADR) (NYSE:SHI) 1 0 0
PBF Energy Inc (NYSE:PBF) 18 1 0
InterOil Corporation (USA) (NYSE:IOC) 13 0 0

With the returns demonstrated by Insider Monkey’s tactics, retail investors must always pay attention to hedge fund and insider trading sentiment, and CVR Energy, Inc. (NYSE:CVI) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.