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In this article we will check out the progression of hedge fund sentiment towards CNH Industrial NV (NYSE:CNHI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is CNH Industrial NV (NYSE:CNHI) ready to rally soon? Money managers were turning bullish. The number of bullish hedge fund bets improved by 7 lately. CNH Industrial NV (NYSE:CNHI) was in 23 hedge funds' portfolios at the end of March. The all time high for this statistic is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CNHI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now we're going to check out the key hedge fund action encompassing CNH Industrial NV (NYSE:CNHI).
Do Hedge Funds Think CNHI Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNHI over the last 23 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of CNH Industrial NV (NYSE:CNHI), with a stake worth $164.8 million reported as of the end of March. Trailing Arrowstreet Capital was GAMCO Investors, which amassed a stake valued at $154.9 million. Citadel Investment Group, Balyasny Asset Management, and Renaissance Technologies 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 Odey Asset Management Group allocated the biggest weight to CNH Industrial NV (NYSE:CNHI), around 8.63% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, designating 3.51 percent of its 13F equity portfolio to CNHI.
As one would reasonably expect, key hedge funds have jumped into CNH Industrial NV (NYSE:CNHI) headfirst. PDT Partners, managed by Peter Muller, initiated the most valuable position in CNH Industrial NV (NYSE:CNHI). PDT Partners had $21.4 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $16.2 million position during the quarter. The following funds were also among the new CNHI investors: Javier Velazquez's Albar Capital, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Ben Gambill's Tiger Eye Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CNH Industrial NV (NYSE:CNHI) but similarly valued. These stocks are Plug Power, Inc. (NASDAQ:PLUG), XP Inc. (NASDAQ:XP), HubSpot Inc (NYSE:HUBS), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), W.W. Grainger, Inc. (NYSE:GWW), and Enphase Energy Inc (NASDAQ:ENPH). This group of stocks' market values resemble CNHI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLUG,25,612662,4 XP,23,480268,-6 HUBS,46,1738961,-6 FOX,25,774862,8 FOXA,38,865348,-1 GWW,30,351308,0 ENPH,49,803938,1 Average,33.7,803907,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $804 million. That figure was $740 million in CNHI's case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks CNH Industrial NV (NYSE:CNHI) is even less popular than XP. Our overall hedge fund sentiment score for CNHI is 40. 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. Hedge funds dodged a bullet by taking a bearish stance towards CNHI. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market again by 7.7 percentage points. Unfortunately CNHI wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); CNHI investors were disappointed as the stock returned 1.5% since the end of the first quarter (through 7/16) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.