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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards FMC Corporation (NYSE:FMC).
Is FMC a good stock to buy now? The smart money was cutting their exposure. The number of long hedge fund positions decreased by 1 recently. FMC Corporation (NYSE:FMC) was in 41 hedge funds' portfolios at the end of September. The all time high for this statistic is 46. Our calculations also showed that FMC 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.
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 S&P 500 ETFs by more than 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 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 stocks that are in our short portfolio.
Steven Cohen of Point72 Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we're going to check out the key hedge fund action encompassing FMC Corporation (NYSE:FMC).
Do Hedge Funds Think FMC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the second quarter of 2020. On the other hand, there were a total of 39 hedge funds with a bullish position in FMC a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Pelham Capital held the most valuable stake in FMC Corporation (NYSE:FMC), which was worth $128.4 million at the end of the third quarter. On the second spot was Glenview Capital which amassed $73.6 million worth of shares. Cardinal Capital, Citadel Investment Group, and Millennium 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 Pelham Capital allocated the biggest weight to FMC Corporation (NYSE:FMC), around 9.93% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, earmarking 6.03 percent of its 13F equity portfolio to FMC.
Since FMC Corporation (NYSE:FMC) has faced falling interest from the smart money, logic holds that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q4. At the top of the heap, Phill Gross and Robert Atchinson's Adage Capital Management said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, worth about $14.7 million in stock, and Michael Price's MFP Investors was right behind this move, as the fund dropped about $8.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as FMC Corporation (NYSE:FMC) but similarly valued. We will take a look at Duke Realty Corporation (NYSE:DRE), Black Knight, Inc. (NYSE:BKI), Magna International Inc. (NYSE:MGA), Burlington Stores Inc (NYSE:BURL), MongoDB, Inc. (NASDAQ:MDB), Nucor Corporation (NYSE:NUE), and Zebra Technologies Corporation (NASDAQ:ZBRA). All of these stocks' market caps resemble FMC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRE,22,145143,3 BKI,41,947273,-3 MGA,21,348863,2 BURL,30,1219720,-8 MDB,42,1356747,5 NUE,28,110512,2 ZBRA,44,817708,6 Average,32.6,706567,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $707 million. That figure was $526 million in FMC's case. Zebra Technologies Corporation (NASDAQ:ZBRA) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 21 bullish hedge fund positions. FMC Corporation (NYSE:FMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FMC is 74.2. 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 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately FMC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FMC were disappointed as the stock returned 8.1% since the end of September (through 12/14) and underperformed 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.