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Hedge Fund Sentiment Is Stagnant On Vale SA (VALE)

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of more than 867 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Vale SA (NYSE:VALE) based on those filings.

Vale SA (NYSE:VALE) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of September. Our calculations also showed that VALE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare VALE to other stocks including DoorDash, Inc. (NYSE:DASH), CME Group Inc (NASDAQ:CME), and Cigna Corporation (NYSE:CI) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. Keeping this in mind let's analyze the key hedge fund action regarding Vale SA (NYSE:VALE).

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

Do Hedge Funds Think VALE Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VALE over the last 25 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Vale SA (NYSE:VALE) was held by Fisher Asset Management, which reported holding $486.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $470.9 million position. Other investors bullish on the company included GQG Partners, AQR Capital Management, and Contrarian Capital. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Vale SA (NYSE:VALE), around 21.34% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 1.21 percent of its 13F equity portfolio to VALE.

Due to the fact that Vale SA (NYSE:VALE) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of funds that slashed their positions entirely last quarter. Intriguingly, Martin Taylor's Crake Asset Management dropped the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising about $76.6 million in stock. Richard Driehaus's fund, Driehaus Capital, also dropped its stock, about $44.8 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to Vale SA (NYSE:VALE). We will take a look at DoorDash, Inc. (NYSE:DASH), CME Group Inc (NASDAQ:CME), Cigna Corporation (NYSE:CI), Westpac Banking Corporation (NYSE:WBK), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), CSX Corporation (NASDAQ:CSX), and ABB Ltd (NYSE:ABB). This group of stocks' market caps match VALE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DASH,42,9358288,-3 CME,64,2686424,2 CI,58,2302081,-5 WBK,6,34160,2 PBR,23,3004383,-2 CSX,56,3915444,0 ABB,19,721684,4 Average,38.3,3146066,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.3 hedge funds with bullish positions and the average amount invested in these stocks was $3146 million. That figure was $1980 million in VALE's case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 6 bullish hedge fund positions. Vale SA (NYSE:VALE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VALE is 45.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately VALE wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VALE investors were disappointed as the stock returned -3.2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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