Where Do Hedge Funds Stand On Commercial Metals Company (CMC)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Commercial Metals Company (NYSE:CMC) changed recently.

Is Commercial Metals Company (NYSE:CMC) a healthy stock for your portfolio? Investors who are in the know were becoming less confident. The number of long hedge fund bets retreated by 3 in recent months. Commercial Metals Company (NYSE:CMC) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 27. Our calculations also showed that CMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now we’re going to take a glance at the fresh hedge fund action surrounding Commercial Metals Company (NYSE:CMC).

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

Heading into the second quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in CMC a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of Commercial Metals Company (NYSE:CMC), with a stake worth $44.4 million reported as of the end of March. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $28.1 million. Royce & Associates, Verdad Advisers, and Highline Capital 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 Highline Capital Management allocated the biggest weight to Commercial Metals Company (NYSE:CMC), around 4.52% of its 13F portfolio. Verdad Advisers is also relatively very bullish on the stock, earmarking 4.18 percent of its 13F equity portfolio to CMC.

Judging by the fact that Commercial Metals Company (NYSE:CMC) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their entire stakes heading into Q2. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp sold off the biggest stake of the 750 funds watched by Insider Monkey, worth an estimated $1.6 million in stock, and Renee Yao’s Neo Ivy Capital was right behind this move, as the fund sold off about $0.8 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds heading into Q2.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Commercial Metals Company (NYSE:CMC) but similarly valued. We will take a look at Hancock Whitney Corporation (NASDAQ:HWC), MultiPlan Corporation (NYSE:MPLN), LGI Homes Inc (NASDAQ:LGIH), Triton International Limited (NYSE:TRTN), Vicor Corp (NASDAQ:VICR), Datto Holding Corp. (NYSE:MSP), and Scientific Games Corp (NASDAQ:SGMS). This group of stocks’ market values are similar to CMC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HWC 15 114698 0
MPLN 30 328984 5
LGIH 16 80296 -7
TRTN 30 264199 7
VICR 20 88034 2
MSP 14 2729336 -3
SGMS 23 785499 0
Average 21.1 627292 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $627 million. That figure was $135 million in CMC’s case. MultiPlan Corporation (NYSE:MPLN) is the most popular stock in this table. On the other hand Datto Holding Corp. (NYSE:MSP) is the least popular one with only 14 bullish hedge fund positions. Commercial Metals Company (NYSE:CMC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMC is 43. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately CMC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CMC investors were disappointed as the stock returned -2.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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