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How Did Freeport-McMoRan Inc. (FCX) Compare Against Top Hedge Fund Stocks in 2019?

Reymerlyn Martin

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 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Freeport-McMoRan Inc. (NYSE:FCX).

Is Freeport-McMoRan Inc. (NYSE:FCX) worth your attention right now? The smart money is becoming hopeful. The number of bullish hedge fund positions improved by 4 in recent months. Our calculations also showed that FCX 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). FCX was in 37 hedge funds' portfolios at the end of the third quarter of 2019. There were 33 hedge funds in our database with FCX holdings at the end of the previous quarter.

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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_25910" align="aligncenter" width="598"] Carl Icahn of Icahn Capital[/caption]

Most Popular Stocks Among Hedge Funds

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his 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. Now let's review the fresh hedge fund action encompassing Freeport-McMoRan Inc. (NYSE:FCX).

How are hedge funds trading Freeport-McMoRan Inc. (NYSE:FCX)?

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in FCX a year ago. So, let's find out 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, Ken Fisher's Fisher Asset Management has the biggest position in Freeport-McMoRan Inc. (NYSE:FCX), worth close to $371.5 million, comprising 0.4% of its total 13F portfolio. The second most bullish fund manager is Carl Icahn of Icahn Capital, with a $327.1 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Ken Griffin's Citadel Investment Group, Brian Ashford-Russell and Tim Woolley's Polar Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Icahn Capital allocated the biggest weight to Freeport-McMoRan Inc. (NYSE:FCX), around 1.27% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, earmarking 1.14 percent of its 13F equity portfolio to FCX.

As aggregate interest increased, key money managers were breaking ground themselves. Renaissance Technologies, founded by Jim Simons, assembled the largest position in Freeport-McMoRan Inc. (NYSE:FCX). Renaissance Technologies had $25.6 million invested in the company at the end of the quarter. Todd J. Kantor's Encompass Capital Advisors also initiated a $15.4 million position during the quarter. The other funds with brand new FCX positions are Joe DiMenna's ZWEIG DIMENNA PARTNERS, David Greenspan's Slate Path Capital, and Paul Marshall and Ian Wace's Marshall Wace.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Freeport-McMoRan Inc. (NYSE:FCX) but similarly valued. We will take a look at Seattle Genetics, Inc. (NASDAQ:SGEN), Cardinal Health, Inc. (NYSE:CAH), CNH Industrial NV (NYSE:CNHI), and Grifols SA (NASDAQ:GRFS). This group of stocks' market caps are similar to FCX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SGEN,27,4587575,10 CAH,25,776365,-3 CNHI,14,341649,0 GRFS,19,361224,3 Average,21.25,1516703,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $1517 million. That figure was $1013 million in FCX's case. Seattle Genetics, Inc. (NASDAQ:SGEN) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Freeport-McMoRan Inc. (NYSE:FCX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately FCX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FCX were disappointed as the stock returned 26.9% so far in 2019 (through 12/23) 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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