Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Commercial Metals Company (NYSE:CMC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Commercial Metals Company (NYSE:CMC) a buy here? The best stock pickers are selling. The number of long hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that cmc isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a peek at the fresh hedge fund action surrounding Commercial Metals Company (NYSE:CMC).
What does the smart money think about Commercial Metals Company (NYSE:CMC)?
Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in CMC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Highline Capital Management held the most valuable stake in Commercial Metals Company (NYSE:CMC), which was worth $52.1 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $52 million worth of shares. Moreover, Luminus Management, Royce & Associates, and GLG Partners were also bullish on Commercial Metals Company (NYSE:CMC), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Commercial Metals Company (NYSE:CMC) has faced bearish sentiment from hedge fund managers, logic holds that there were a few funds who sold off their positions entirely heading into Q3. Intriguingly, Zilvinas Mecelis's Covalis Capital cut the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling about $2.4 million in stock. Joel Greenblatt's fund, Gotham Asset Management, also cut its stock, about $1.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Commercial Metals Company (NYSE:CMC) but similarly valued. These stocks are Brooks Automation, Inc. (NASDAQ:BRKS), Wingstop Inc (NASDAQ:WING), First Bancorp (NYSE:FBP), and Patterson Companies, Inc. (NASDAQ:PDCO). This group of stocks' market values resemble CMC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRKS,9,70789,-3 WING,21,129095,4 FBP,20,192189,2 PDCO,28,215378,-1 Average,19.5,151863,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $197 million in CMC's case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand Brooks Automation, Inc. (NASDAQ:BRKS) is the least popular one with only 9 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. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CMC wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CMC investors were disappointed as the stock returned 9.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.