Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Cemex SAB de CV (NYSE:CX) investors should be aware of a decrease in hedge fund sentiment recently. CX was in 11 hedge funds' portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with CX positions at the end of the previous quarter. Our calculations also showed that CX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's analyze the latest hedge fund action surrounding Cemex SAB de CV (NYSE:CX).
What have hedge funds been doing with Cemex SAB de CV (NYSE:CX)?
At Q2's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in CX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of Cemex SAB de CV (NYSE:CX), with a stake worth $30.5 million reported as of the end of March. Trailing Oaktree Capital Management was Fisher Asset Management, which amassed a stake valued at $25.8 million. Renaissance Technologies, Millennium Management, and Indus Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Cemex SAB de CV (NYSE:CX) has faced a decline in interest from hedge fund managers, it's easy to see that there were a few fund managers that elected to cut their entire stakes by the end of the second quarter. It's worth mentioning that Thomas E. Claugus's GMT Capital dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth about $7 million in stock. Michael Hintze's fund, CQS Cayman LP, also sold off its stock, about $5 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks similar to Cemex SAB de CV (NYSE:CX). These stocks are Pentair plc (NYSE:PNR), PRA Health Sciences Inc (NASDAQ:PRAH), CubeSmart (NYSE:CUBE), and Enel Chile S.A. (NYSE:ENIC). This group of stocks' market caps are similar to CX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNR,21,546471,-7 PRAH,25,340888,-3 CUBE,18,384323,-2 ENIC,6,28723,1 Average,17.5,325101,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $88 million in CX's case. PRA Health Sciences Inc (NASDAQ:PRAH) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 6 bullish hedge fund positions. Cemex SAB de CV (NYSE:CX) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CX investors were disappointed as the stock returned -7.5% during 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.