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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 CSX Corporation (NYSE:CSX) in this article.
Is CSX stock a buy or sell? Hedge fund interest in CSX Corporation (NYSE:CSX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CSX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as FedEx Corporation (NYSE:FDX), Crown Castle International Corp. (NYSE:CCI), and Lam Research Corporation (NASDAQ:LRCX) to gather more data points.
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. 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 124 percentage points since March 2017 (see the details here).
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 recent hedge fund action surrounding CSX Corporation (NYSE:CSX).
Do Hedge Funds Think CSX Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CSX over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Eric W. Mandelblatt and Gaurav Kapadia's Soroban Capital Partners has the biggest position in CSX Corporation (NYSE:CSX), worth close to $766.5 million, accounting for 5.8% of its total 13F portfolio. Sitting at the No. 2 spot is Egerton Capital Limited, managed by John Armitage, which holds a $594 million position; 3.4% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish consist of Ken Fisher's Fisher Asset Management, Robert Pitts's Steadfast Capital Management and Brandon Haley's Holocene Advisors. In terms of the portfolio weights assigned to each position 11 Capital Partners allocated the biggest weight to CSX Corporation (NYSE:CSX), around 5.85% of its 13F portfolio. Soroban Capital Partners is also relatively very bullish on the stock, setting aside 5.82 percent of its 13F equity portfolio to CSX.
Judging by the fact that CSX Corporation (NYSE:CSX) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there were a few funds who were dropping their full holdings last quarter. Intriguingly, Daniel S. Och's OZ Management dumped the biggest investment of the 750 funds tracked by Insider Monkey, valued at close to $105.1 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $38.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to CSX Corporation (NYSE:CSX). These stocks are FedEx Corporation (NYSE:FDX), Crown Castle International Corp. (NYSE:CCI), Lam Research Corporation (NASDAQ:LRCX), Duke Energy Corporation (NYSE:DUK), Autodesk, Inc. (NASDAQ:ADSK), The Sherwin-Williams Company (NYSE:SHW), and The Bank of Nova Scotia (NYSE:BNS). This group of stocks' market valuations match CSX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FDX,63,2012460,-8 CCI,40,2071704,-2 LRCX,56,2619776,1 DUK,38,614751,2 ADSK,66,3528315,1 SHW,49,1881345,-6 BNS,19,336708,5 Average,47.3,1866437,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.3 hedge funds with bullish positions and the average amount invested in these stocks was $1866 million. That figure was $3315 million in CSX's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 19 bullish hedge fund positions. CSX Corporation (NYSE:CSX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSX is 74.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately CSX wasn't nearly as popular as these 30 stocks and hedge funds that were betting on CSX were disappointed as the stock returned 0.3% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.