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How Did CVR Energy, Inc. (CVI) Perform In Comparison to Hedge Fund Favorites in 2019?

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

CVR Energy, Inc. (NYSE:CVI) shareholders have witnessed an increase in hedge fund interest lately. Our calculations also showed that CVI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Today there are tons of formulas stock traders can use to analyze publicly traded companies. Two of the most under-the-radar formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform the broader indices by a solid amount (see the details here).

Carl Icahn - Icahn Capital Lp

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to go over the fresh hedge fund action encompassing CVR Energy, Inc. (NYSE:CVI).

How are hedge funds trading CVR Energy, Inc. (NYSE:CVI)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 37% from the second quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in CVI a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is CVI A Good Stock To Buy?

The largest stake in CVR Energy, Inc. (NYSE:CVI) was held by Icahn Capital, which reported holding $3134.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $92.7 million position. Other investors bullish on the company included Two Sigma Advisors, Gotham Asset Management, and GLG Partners. In terms of the portfolio weights assigned to each position Icahn Capital allocated the biggest weight to CVR Energy, Inc. (NYSE:CVI), around 12.2% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to CVI.

Consequently, key money managers have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, created the largest position in CVR Energy, Inc. (NYSE:CVI). Bridgewater Associates had $3.5 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new CVI investors: David E. Shaw's D E Shaw, Sara Nainzadeh's Centenus Global Management, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks similar to CVR Energy, Inc. (NYSE:CVI). We will take a look at Envista Holdings Corporation (NYSE:NVST), The Boston Beer Company Inc (NYSE:SAM), Helmerich & Payne, Inc. (NYSE:HP), and Assured Guaranty Ltd. (NYSE:AGO). This group of stocks' market valuations are similar to CVI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVST,21,255475,21 SAM,29,661168,6 HP,28,270247,-5 AGO,35,576379,-1 Average,28.25,440817,5.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $3273 million in CVI's case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Envista Holdings Corporation (NYSE:NVST) is the least popular one with only 21 bullish hedge fund positions. CVR Energy, Inc. (NYSE:CVI) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CVI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CVI investors were disappointed as the stock returned 25.4% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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