Were Hedge Funds Right About Dumping Freeport-McMoRan Inc. (FCX)?

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 first 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 4.5 years and analyze what the smart money thinks of Freeport-McMoRan Inc. (NYSE:FCX) based on that data and determine whether they were really smart about the stock.

Is Freeport-McMoRan Inc. (NYSE:FCX) an exceptional investment today? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets shrunk by 13 in recent months. Our calculations also showed that FCX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are several indicators market participants put to use to analyze their holdings. Some of the less known indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the S&P 500 by a significant amount (see the details here).

Scott Bessent of Key Square Capital Management

Scott Bessent of Key Square Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the latest hedge fund action regarding Freeport-McMoRan Inc. (NYSE:FCX).

What have hedge funds been doing with Freeport-McMoRan Inc. (NYSE:FCX)?

At the end of the first quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FCX over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the biggest position in Freeport-McMoRan Inc. (NYSE:FCX), worth close to $258.3 million, amounting to 0.3% of its total 13F portfolio. On Fisher Asset Management’s heels is Icahn Capital LP, led by Carl Icahn, holding a $180.7 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Ken Griffin’s Citadel Investment Group, David Greenspan’s Slate Path Capital and Stephen Mildenhall’s Contrarius Investment Management. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to Freeport-McMoRan Inc. (NYSE:FCX), around 3.9% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, setting aside 3.38 percent of its 13F equity portfolio to FCX.

Due to the fact that Freeport-McMoRan Inc. (NYSE:FCX) has experienced bearish sentiment from hedge fund managers, we can see that there were a few money managers who were dropping their entire stakes in the first quarter. Intriguingly, Robert Bishop’s Impala Asset Management said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $56.6 million in stock, and Josh Donfeld and David Rogers’s Castle Hook Partners was right behind this move, as the fund dropped about $43.7 million worth. These moves are important to note, as total hedge fund interest fell by 13 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Freeport-McMoRan Inc. (NYSE:FCX). These stocks are Genuine Parts Company (NYSE:GPC), Hasbro, Inc. (NASDAQ:HAS), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and Live Nation Entertainment, Inc. (NYSE:LYV). All of these 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
GPC 22 164418 1
HAS 25 451618 -11
JBHT 25 225951 -3
LYV 46 1626857 2
Average 29.5 617211 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $617 million. That figure was $770 million in FCX’s case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Genuine Parts Company (NYSE:GPC) is the least popular one with only 22 bullish hedge fund positions. Freeport-McMoRan Inc. (NYSE:FCX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on FCX as the stock returned 71.4% in Q2 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.