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Were Hedge Funds Right About Flocking Into CNH Industrial NV (CNHI) ?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was CNH Industrial NV (NYSE:CNHI).

CNH Industrial NV (NYSE:CNHI) was in 23 hedge funds’ portfolios at the end of the first quarter of 2019. CNHI has experienced an increase in enthusiasm from smart money recently. There were 16 hedge funds in our database with CNHI positions at the end of the previous quarter. Our calculations also showed that cnhi isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli

We’re going to take a glance at the key hedge fund action surrounding CNH Industrial NV (NYSE:CNHI).

How are hedge funds trading CNH Industrial NV (NYSE:CNHI)?

Heading into the second quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CNHI over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

No of Hedge Funds with CNHI Positions

More specifically, GAMCO Investors was the largest shareholder of CNH Industrial NV (NYSE:CNHI), with a stake worth $128.8 million reported as of the end of March. Trailing GAMCO Investors was Southeastern Asset Management, which amassed a stake valued at $92.1 million. Arrowstreet Capital, Renaissance Technologies, and PDT Partners were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, assembled the biggest position in CNH Industrial NV (NYSE:CNHI). Renaissance Technologies had $24.7 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $14.4 million position during the quarter. The other funds with brand new CNHI positions are D. E. Shaw’s D E Shaw, Nick Niell’s Arrowgrass Capital Partners, and Jonathan Barrett and Paul Segal’s Luminus Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CNH Industrial NV (NYSE:CNHI) but similarly valued. We will take a look at Weibo Corp (NASDAQ:WB), MGM Resorts International (NYSE:MGM), International Flavors & Fragrances Inc (NYSE:IFF), and Marathon Oil Corporation (NYSE:MRO). This group of stocks’ market caps are closest to CNHI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WB 13 448621 -4
MGM 45 1756675 -1
IFF 16 188308 -5
MRO 37 732698 0
Average 27.75 781576 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $406 million in CNHI’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 13 bullish hedge fund positions. CNH Industrial NV (NYSE:CNHI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CNHI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CNHI investors were disappointed as the stock returned -12.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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