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Hedge Funds Aren’t Crazy About CVR Energy, Inc. (CVI) Anymore

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded CVR Energy, Inc. (NYSE:CVI) and determine whether the smart money was really smart about this stock.

Is CVR Energy, Inc. (NYSE:CVI) going to take off soon? Investors who are in the know were getting less bullish. The number of long hedge fund positions dropped by 1 lately. CVR Energy, Inc. (NYSE:CVI) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. Our calculations also showed that CVI isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

To most market participants, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts look at the upper echelon of this club, around 850 funds. Most estimates calculate that this group of people direct the majority of all hedge funds' total asset base, and by keeping track of their highest performing investments, Insider Monkey has unsheathed numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Most Popular Stocks Among Hedge Funds
Most Popular Stocks Among Hedge Funds

Carl Icahn of Icahn Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we're going to take a look at the new hedge fund action surrounding CVR Energy, Inc. (NYSE:CVI).

Hedge fund activity in CVR Energy, Inc. (NYSE:CVI)

At second quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in CVI 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.

More specifically, Icahn Capital LP was the largest shareholder of CVR Energy, Inc. (NYSE:CVI), with a stake worth $1431.8 million reported as of the end of September. Trailing Icahn Capital LP was Renaissance Technologies, which amassed a stake valued at $44.8 million. Encompass Capital Advisors, Two Sigma Advisors, and Balyasny Asset 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 Icahn Capital LP allocated the biggest weight to CVR Energy, Inc. (NYSE:CVI), around 7.26% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, designating 1.53 percent of its 13F equity portfolio to CVI.

Since CVR Energy, Inc. (NYSE:CVI) has faced falling interest from hedge fund managers, we can see that there exists a select few hedgies who were dropping their full holdings heading into Q3. At the top of the heap, Peter Algert and Kevin Coldiron's Algert Coldiron Investors dumped the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $0.5 million in stock, and Cliff Asness's AQR Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q3.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CVR Energy, Inc. (NYSE:CVI) but similarly valued. These stocks are Main Street Capital Corporation (NYSE:MAIN), Evertec Inc (NYSE:EVTC), Ryder System, Inc. (NYSE:R), Twist Bioscience Corporation (NASDAQ:TWST), Covetrus, Inc. (NASDAQ:CVET), ChampionX Corporation (NYSE:CHX), and First Interstate Bancsystem Inc (NASDAQ:FIBK). All of these stocks' market caps match CVI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAIN,7,11977,0 EVTC,18,245385,-1 R,20,202663,2 TWST,19,318287,3 CVET,24,210441,2 CHX,30,452274,11 FIBK,12,20747,5 Average,18.6,208825,3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $1506 million in CVI's case. ChampionX Corporation (NYSE:CHX) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 7 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. Our overall hedge fund sentiment score for CVI is 45.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately CVI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CVI investors were disappointed as the stock returned -38.4% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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