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Hedge Funds Are Buying CME Group Inc (CME)

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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is CME Group Inc (NASDAQ:CME), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

CME Group Inc (NASDAQ:CME) was in 60 hedge funds' portfolios at the end of March. The all time high for this statistic is 62. CME has experienced an increase in activity from the world's largest hedge funds lately. There were 58 hedge funds in our database with CME holdings at the end of December. Our calculations also showed that CME isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most market participants, hedge funds are viewed as slow, outdated investment vehicles of the past. While there are over 8000 funds with their doors open at present, Our experts choose to focus on the upper echelon of this group, around 850 funds. It is estimated that this group of investors command the lion's share of all hedge funds' total capital, and by paying attention to their finest picks, Insider Monkey has uncovered numerous investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Alan Howard
Alan Howard

Alan Howard of Brevan Howard

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. 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 homepage. With all of this in mind let's take a glance at the recent hedge fund action surrounding CME Group Inc (NASDAQ:CME).

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

At the end of March, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CME over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, GuardCap Asset Management held the most valuable stake in CME Group Inc (NASDAQ:CME), which was worth $657.5 million at the end of the fourth quarter. On the second spot was Cantillon Capital Management which amassed $359.2 million worth of shares. Intermede Investment Partners, VGI Partners, and Echo Street 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 GuardCap Asset Management allocated the biggest weight to CME Group Inc (NASDAQ:CME), around 11.88% of its 13F portfolio. VGI Partners is also relatively very bullish on the stock, designating 11.36 percent of its 13F equity portfolio to CME.

Consequently, some big names were leading the bulls' herd. Hitchwood Capital Management, managed by James Crichton, initiated the largest position in CME Group Inc (NASDAQ:CME). Hitchwood Capital Management had $40.8 million invested in the company at the end of the quarter. Marc Lisker, Glenn Fuhrman and John Phelan's MSDC Management also initiated a $35.7 million position during the quarter. The following funds were also among the new CME investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Israel Englander's Millennium Management, and Alan Howard's Brevan Howard.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CME Group Inc (NASDAQ:CME) but similarly valued. These stocks are CSX Corporation (NYSE:CSX), Baidu, Inc. (NASDAQ:BIDU), Activision Blizzard, Inc. (NASDAQ:ATVI), ConocoPhillips (NYSE:COP), NetEase, Inc (NASDAQ:NTES), Chubb Limited (NYSE:CB), and Becton, Dickinson and Company (NYSE:BDX). All of these stocks' market caps are similar to CME's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSX,53,3699622,-5 BIDU,89,6572291,38 ATVI,76,3580901,-5 COP,51,1205455,2 NTES,32,3501491,-6 CB,41,1605208,7 BDX,65,3732947,0 Average,58.1,3413988,4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.1 hedge funds with bullish positions and the average amount invested in these stocks was $3414 million. That figure was $2399 million in CME's case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand NetEase, Inc (NASDAQ:NTES) is the least popular one with only 32 bullish hedge fund positions. CME Group Inc (NASDAQ:CME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CME is 60.6. 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 positive signal but 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately CME wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CME were disappointed as the stock returned 5.4% since the end of March (through 6/11) 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 many of these stocks already outperformed the market since 2019.

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

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