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

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 second quarter. One of these stocks was Freeport-McMoRan Inc. (NYSE:FCX).

Is Freeport-McMoRan Inc. (NYSE:FCX) a bargain? Hedge funds are in an optimistic mood. The number of long hedge fund positions advanced by 4 lately. Our calculations also showed that FCX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Most Popular Stocks Among Hedge Funds

Carl Icahn of Icahn Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action encompassing Freeport-McMoRan Inc. (NYSE:FCX).

Hedge fund activity in Freeport-McMoRan Inc. (NYSE:FCX)

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FCX over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FCX_dec2019

More specifically, Fisher Asset Management was the largest shareholder of Freeport-McMoRan Inc. (NYSE:FCX), with a stake worth $371.5 million reported as of the end of September. Trailing Fisher Asset Management was Icahn Capital, which amassed a stake valued at $327.1 million. Citadel Investment Group, Polar Capital, and Renaissance Technologies 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 Icahn Capital allocated the biggest weight to Freeport-McMoRan Inc. (NYSE:FCX), around 1.27% of its portfolio. Masters Capital Management is also relatively very bullish on the stock, designating 1.14 percent of its 13F equity portfolio to FCX.

As one would reasonably expect, key money managers were breaking ground themselves. Renaissance Technologies initiated the most outsized position in Freeport-McMoRan Inc. (NYSE:FCX). Renaissance Technologies had $25.6 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $15.4 million position during the quarter. The other funds with brand new FCX positions are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, David Greenspan’s Slate Path Capital, and Paul Marshall and Ian Wace’s Marshall Wace.

Let’s go over hedge fund activity in other stocks similar to Freeport-McMoRan Inc. (NYSE:FCX). We will take a look at Seattle Genetics, Inc. (NASDAQ:SGEN), Cardinal Health, Inc. (NYSE:CAH), CNH Industrial NV (NYSE:CNHI), and Grifols SA (NASDAQ:GRFS). This group of stocks’ market caps match FCX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SGEN 27 4587575 10
CAH 25 776365 -3
CNHI 14 341649 0
GRFS 19 361224 3
Average 21.25 1516703 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $1517 million. That figure was $1013 million in FCX’s case. Seattle Genetics, Inc. (NASDAQ:SGEN) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Freeport-McMoRan Inc. (NYSE:FCX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FCX as the stock returned 19.6% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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