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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 third 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 5 years and analyze what the smart money thinks of Compass Minerals International, Inc. (NYSE:CMP) based on that data.
Is CMP a good stock to buy now? Money managers were taking a bearish view. The number of long hedge fund bets decreased by 4 recently. Compass Minerals International, Inc. (NYSE:CMP) was in 14 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. Our calculations also showed that CMP isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to go over the key hedge fund action surrounding Compass Minerals International, Inc. (NYSE:CMP).
Do Hedge Funds Think CMP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CMP over the last 21 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Cove Street Capital held the most valuable stake in Compass Minerals International, Inc. (NYSE:CMP), which was worth $36 million at the end of the third quarter. On the second spot was Millennium Management which amassed $7.7 million worth of shares. GLG Partners, Marshall Wace LLP, and 12th Street Asset 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 Cove Street Capital allocated the biggest weight to Compass Minerals International, Inc. (NYSE:CMP), around 6.81% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, dishing out 2.66 percent of its 13F equity portfolio to CMP.
Due to the fact that Compass Minerals International, Inc. (NYSE:CMP) has faced a decline in interest from the smart money, it's easy to see that there were a few fund managers who were dropping their positions entirely heading into Q4. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management sold off the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $3.4 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $1.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Compass Minerals International, Inc. (NYSE:CMP) but similarly valued. We will take a look at Corcept Therapeutics Incorporated (NASDAQ:CORT), Red Rock Resorts, Inc. (NASDAQ:RRR), Alliance Data Systems Corporation (NYSE:ADS), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), BancorpSouth Bank (NYSE:BXS), Insight Enterprises, Inc. (NASDAQ:NSIT), and Lions Gate Entertainment Corporation (NYSE:LGF-B). This group of stocks' market valuations are closest to CMP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CORT,22,238362,-1 RRR,29,361467,-1 ADS,36,427033,7 SPR,31,468951,-6 BXS,19,33217,9 NSIT,22,66764,2 LGF-B,22,246159,-4 Average,25.9,263136,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $67 million in CMP's case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand BancorpSouth Bank (NYSE:BXS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Compass Minerals International, Inc. (NYSE:CMP) is even less popular than BXS. Our overall hedge fund sentiment score for CMP is 24.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CMP, though not to the same extent, as the stock returned 11.1% since the end of September (through December 8th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.