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Hedge Funds Are Bullish On Freeport-McMoRan Inc. (FCX)

Nina Todic

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 have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Freeport-McMoRan Inc. (NYSE:FCX) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is Freeport-McMoRan Inc. (NYSE:FCX) an exceptional stock to buy now? Hedge funds are becoming less confident though hedge fund sentiment towards the stock is still near its all time high which was achieved in September 2018. The number of long hedge fund positions shrunk by 4 since then. Our calculations also showed that FCX isn't among the 30 most popular stocks among hedge funds. FCX was in 43 hedge funds' portfolios at the end of December. There were 47 hedge funds in our database with FCX positions at the end of September.

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' 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Carl Icahn as viking

We're going to take a gander at the new hedge fund action surrounding Freeport-McMoRan Inc. (NYSE:FCX).

What have hedge funds been doing with Freeport-McMoRan Inc. (NYSE:FCX)?

At Q4's end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in FCX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FCX

Among these funds, Icahn Capital LP held the most valuable stake in Freeport-McMoRan Inc. (NYSE:FCX), which was worth $517.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $333.8 million worth of shares. Moreover, Iridian Asset Management, Two Sigma Advisors, and Millennium Management were also bullish on Freeport-McMoRan Inc. (NYSE:FCX), allocating a large percentage of their portfolios to this stock.

Because Freeport-McMoRan Inc. (NYSE:FCX) has experienced declining sentiment from the smart money, it's safe to say that there was a specific group of hedgies that slashed their entire stakes heading into Q3. Interestingly, Josh Donfeld and David Rogers's Castle Hook Partners dumped the largest stake of all the hedgies monitored by Insider Monkey, comprising close to $92.1 million in stock, and Todd J. Kantor's Encompass Capital Advisors was right behind this move, as the fund dumped about $15.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Freeport-McMoRan Inc. (NYSE:FCX) but similarly valued. These stocks are DXC Technology Company (NYSE:DXC), Total System Services, Inc. (NYSE:TSS), American Airlines Group Inc (NASDAQ:AAL), and Ctrip.com International, Ltd. (NASDAQ:CTRP). This group of stocks' market caps are similar to FCX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DXC,43,1704996,-7 TSS,35,1108431,0 AAL,45,2296666,6 CTRP,21,771724,2 Average,36,1470454,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1470 million. That figure was $1504 million in FCX's case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Ctrip.com International, Ltd. (NASDAQ:CTRP) is the least popular one with only 21 bullish hedge fund positions. Freeport-McMoRan Inc. (NYSE:FCX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on FCX as the stock returned 20.3% and outperformed the market as well.

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

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