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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about CME Group Inc (NASDAQ:CME) in this article.
Is CME stock a buy or sell? The smart money was reducing their bets on the stock. The number of bullish hedge fund positions retreated by 1 lately. CME Group Inc (NASDAQ:CME) was in 58 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 holdings at the end of September.
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. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Armitage of Egerton Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Keeping this in mind let's review the key hedge fund action encompassing CME Group Inc (NASDAQ:CME).
Do Hedge Funds Think CME Is A Good Stock To Buy Now?
At the end of December, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. On the other hand, there were a total of 54 hedge funds with a bullish position in CME a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Guardian Capital's GuardCap Asset Management has the biggest position in CME Group Inc (NASDAQ:CME), worth close to $527 million, amounting to 10.8% of its total 13F portfolio. Coming in second is Cantillon Capital Management, managed by William von Mueffling, which holds a $330.8 million position; 2.5% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include D. E. Shaw's D E Shaw, Barry Dargan's Intermede Investment Partners and Panayotis Takis Sparaggis's 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, setting aside 10.75 percent of its 13F equity portfolio to CME.
Seeing as CME Group Inc (NASDAQ:CME) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies that decided to sell off their full holdings heading into Q1. It's worth mentioning that Andreas Halvorsen's Viking Global sold off the biggest position of all the hedgies monitored by Insider Monkey, worth about $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 heading into Q1.
Let's now take a look at hedge fund activity in other stocks similar to CME Group Inc (NASDAQ:CME). These stocks are 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 values are closest to CME's market value.
[table] 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 [/table]
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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on CME as the stock returned 11.3% since the end of December (through 3/19) 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.
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Disclosure: None. This article was originally published at Insider Monkey.