It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Cemex SAB de CV (NYSE:CX).
Cemex SAB de CV (NYSE:CX) investors should pay attention to a decrease in hedge fund interest in recent months. CX was in 9 hedge funds' portfolios at the end of the third quarter of 2019. There were 11 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 (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most investors, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, We hone in on the elite of this group, around 750 funds. These money managers command the majority of the smart money's total capital, and by tailing their first-class equity investments, Insider Monkey has figured out various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_30614" align="aligncenter" width="600"] Howard Marks of Oaktree Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to analyze the latest hedge fund action regarding Cemex SAB de CV (NYSE:CX).
How have hedgies been trading Cemex SAB de CV (NYSE:CX)?
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in CX 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.
Among these funds, Oaktree Capital Management held the most valuable stake in Cemex SAB de CV (NYSE:CX), which was worth $29.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $14.4 million worth of shares. Fisher Asset Management, Lonestar Capital Management, and Citadel Investment Group 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 Lonestar Capital Management allocated the biggest weight to Cemex SAB de CV (NYSE:CX), around 0.78% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to CX.
Judging by the fact that Cemex SAB de CV (NYSE:CX) has experienced a decline in interest from the smart money, it's easy to see that there is a sect of money managers that slashed their positions entirely heading into Q4. At the top of the heap, Howard Marks's Oaktree Capital Management cut the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at close to $8.3 million in stock. David Kowitz and Sheldon Kasowitz's fund, Indus Capital, also dumped its stock, about $3.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cemex SAB de CV (NYSE:CX) but similarly valued. These stocks are New York Community Bancorp, Inc. (NYSE:NYCB), Skechers USA Inc (NYSE:SKX), TCF Financial Corporation (NASDAQ:TCF), and GDS Holdings Limited (NASDAQ:GDS). This group of stocks' market valuations resemble CX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NYCB,23,297857,4 SKX,26,520591,3 TCF,28,359418,8 GDS,30,1126926,2 Average,26.75,576198,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $60 million in CX's case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand New York Community Bancorp, Inc. (NYSE:NYCB) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Cemex SAB de CV (NYSE:CX) is even less popular than NYCB. Hedge funds dodged a bullet by taking a bearish stance towards CX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CX investors were disappointed as the stock returned -4.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.