We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Corteva, Inc. (NYSE:CTVA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Corteva, Inc. (NYSE:CTVA) a healthy stock for your portfolio? The smart money is turning less bullish. The number of bullish hedge fund positions went down by 10 in recent months. Our calculations also showed that CTVA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). CTVA was in 27 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 37 hedge funds in our database with CTVA holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most shareholders, hedge funds are perceived as slow, outdated financial vehicles of years past. While there are greater than 8000 funds trading today, Our researchers hone in on the elite of this group, about 850 funds. These hedge fund managers control the lion's share of the smart money's total asset base, and by tracking their highest performing stock picks, Insider Monkey has found several investment strategies that have historically outrun the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_339739" align="aligncenter" width="400"] Ricky Sandler of Eminence Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a peek at the fresh hedge fund action regarding Corteva, Inc. (NYSE:CTVA).
How have hedgies been trading Corteva, Inc. (NYSE:CTVA)?
At Q4's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the third quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in CTVA a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eminence Capital was the largest shareholder of Corteva, Inc. (NYSE:CTVA), with a stake worth $199.9 million reported as of the end of September. Trailing Eminence Capital was Sessa Capital, which amassed a stake valued at $166.5 million. Glenview Capital, Adage Capital Management, and Laurion Capital 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 Sessa Capital allocated the biggest weight to Corteva, Inc. (NYSE:CTVA), around 17.13% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, setting aside 4.69 percent of its 13F equity portfolio to CTVA.
Because Corteva, Inc. (NYSE:CTVA) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of money managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Israel Englander's Millennium Management dumped the largest investment of the 750 funds followed by Insider Monkey, totaling close to $26.6 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund cut about $14.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 10 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Corteva, Inc. (NYSE:CTVA) but similarly valued. These stocks are ANSYS, Inc. (NASDAQ:ANSS), Align Technology, Inc. (NASDAQ:ALGN), CoStar Group Inc (NASDAQ:CSGP), and Hartford Financial Services Group Inc (NYSE:HIG). All of these stocks' market caps are closest to CTVA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANSS,33,1348315,0 ALGN,40,2552526,1 CSGP,44,1729509,5 HIG,34,738852,-2 Average,37.75,1592301,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1592 million. That figure was $676 million in CTVA's case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand ANSYS, Inc. (NASDAQ:ANSS) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Corteva, Inc. (NYSE:CTVA) is even less popular than ANSS. Hedge funds dodged a bullet by taking a bearish stance towards CTVA. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately CTVA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CTVA investors were disappointed as the stock returned -15% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.