Was The Smart Money Right About CF Industries Holdings (CF)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards CF Industries Holdings, Inc. (NYSE:CF).

Is CF Industries Holdings, Inc. (NYSE:CF) a bargain? Prominent investors were becoming hopeful. The number of bullish hedge fund bets improved by 8 in recent months. CF Industries Holdings, Inc. (NYSE:CF) was in 42 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 50. Our calculations also showed that CF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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Do Hedge Funds Think CF Is A Good Stock To Buy Now?

At the end of December, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the third quarter of 2020. By comparison, 41 hedge funds held shares or bullish call options in CF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CF A Good Stock To Buy?

Among these funds, Greenhaven Associates held the most valuable stake in CF Industries Holdings, Inc. (NYSE:CF), which was worth $131.5 million at the end of the fourth quarter. On the second spot was Glendon Capital Management which amassed $129.5 million worth of shares. D E Shaw, Arrowstreet Capital, and Millennium Management 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 Glendon Capital Management allocated the biggest weight to CF Industries Holdings, Inc. (NYSE:CF), around 21.01% of its 13F portfolio. Cobalt Capital Management is also relatively very bullish on the stock, earmarking 3.83 percent of its 13F equity portfolio to CF.

Now, specific money managers have jumped into CF Industries Holdings, Inc. (NYSE:CF) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in CF Industries Holdings, Inc. (NYSE:CF). Balyasny Asset Management had $26.6 million invested in the company at the end of the quarter. Ben Jacobs’s Anomaly Capital Management also initiated a $23.4 million position during the quarter. The other funds with brand new CF positions are Wayne Cooperman’s Cobalt Capital Management, Steve Cohen’s Point72 Asset Management, and Joe Milano’s Greenhouse Funds.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CF Industries Holdings, Inc. (NYSE:CF) but similarly valued. We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), Athene Holding Ltd. (NYSE:ATH), Tata Motors Limited (NYSE:TTM), Vereit Inc (NYSE:VER), Omega Healthcare Investors Inc (NYSE:OHI), Encompass Health Corporation (NYSE:EHC), and Companhia Siderurgica Nacional (NYSE:SID). All of these stocks’ market caps are closest to CF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPLA 43 1162142 6
ATH 36 1146379 5
TTM 7 40441 -3
VER 23 683956 5
OHI 15 101266 -4
EHC 35 758170 3
SID 9 43048 2
Average 24 562200 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $835 million in CF’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 7 bullish hedge fund positions. CF Industries Holdings, Inc. (NYSE:CF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CF is 83.8. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on CF as the stock returned 26.5% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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