Was The Smart Money Right About CME Group Inc (CME)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of CME Group Inc (NASDAQ:CME) based on that data.

Is CME Group Inc (NASDAQ:CME) a good investment right now? Hedge funds were reducing their bets on the stock. The number of long hedge fund positions went down by 1 recently. CME Group Inc (NASDAQ:CME) was in 58 hedge funds’ portfolios at the end of December. The all time high for this statistic is 62. Our calculations also showed that CME isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 59 hedge funds in our database with CME positions at the end of the third quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the fresh hedge fund action encompassing CME Group Inc (NASDAQ:CME).

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

At Q4’s end, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. By comparison, 54 hedge funds held shares or bullish call options in CME 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 CME A Good Stock To Buy?

The largest stake in CME Group Inc (NASDAQ:CME) was held by GuardCap Asset Management, which reported holding $527 million worth of stock at the end of December. It was followed by Cantillon Capital Management with a $330.8 million position. Other investors bullish on the company included D E Shaw, Intermede Investment Partners, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to CME Group Inc (NASDAQ:CME), around 11.49% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, designating 10.75 percent of its 13F equity portfolio to CME.

Because CME Group Inc (NASDAQ:CME) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies that slashed their positions entirely last quarter. Intriguingly, Andreas Halvorsen’s Viking Global dumped the largest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $387.6 million in stock, and Mitch Rubin’s RiverPark Advisors was right behind this move, as the fund dropped about $6.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CME Group Inc (NASDAQ:CME) but similarly valued. We will take a look at NetEase, Inc (NASDAQ:NTES), The Southern Company (NYSE:SO), Enbridge Inc (NYSE:ENB), Intercontinental Exchange Inc (NYSE:ICE), Truist Financial Corporation (NYSE:TFC), Illinois Tool Works Inc. (NYSE:ITW), and Global Payments Inc (NYSE:GPN). This group of stocks’ market caps are similar to CME’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTES 38 3467820 -7
SO 32 400160 7
ENB 28 181170 3
ICE 53 3273294 -11
TFC 40 526377 11
ITW 40 704116 1
GPN 55 5554643 -2
Average 40.9 2015369 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $2015 million. That figure was $2276 million in CME’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks CME Group Inc (NASDAQ:CME) is more popular among hedge funds. Our overall hedge fund sentiment score for CME is 82.1. 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. Unfortunately CME wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CME were disappointed as the stock returned 11% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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