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Hedge Funds Have Never Been This Bullish On Compass Minerals International, Inc. (CMP)

Reymerlyn Martin

A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Compass Minerals International, Inc. (NYSE:CMP) during the quarter.

Compass Minerals International, Inc. (NYSE:CMP) investors should pay attention to an increase in hedge fund sentiment in recent months. CMP was in 13 hedge funds' portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with CMP holdings at the end of the previous quarter. Our calculations also showed that CMP isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Bronchick - Cove Street Capital

Let's go over the fresh hedge fund action surrounding Compass Minerals International, Inc. (NYSE:CMP).

What does smart money think about Compass Minerals International, Inc. (NYSE:CMP)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMP over the last 15 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

CMP_jun2019

More specifically, Cove Street Capital was the largest shareholder of Compass Minerals International, Inc. (NYSE:CMP), with a stake worth $45.9 million reported as of the end of March. Trailing Cove Street Capital was Southpoint Capital Advisors, which amassed a stake valued at $27.2 million. Wallace R. Weitz & Co., Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, created the biggest position in Compass Minerals International, Inc. (NYSE:CMP). PDT Partners had $3.1 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $0.5 million position during the quarter. The following funds were also among the new CMP investors: David Harding's Winton Capital Management, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Compass Minerals International, Inc. (NYSE:CMP) but similarly valued. We will take a look at QEP Resources Inc (NYSE:QEP), Atara Biotherapeutics Inc (NASDAQ:ATRA), Redfin Corporation (NASDAQ:RDFN), and Alexander & Baldwin Inc (NYSE:ALEX). This group of stocks' market values match CMP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QEP,23,291990,-2 ATRA,15,672346,4 RDFN,8,177016,1 ALEX,5,8561,-5 Average,12.75,287478,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $100 million in CMP's case. QEP Resources Inc (NYSE:QEP) is the most popular stock in this table. On the other hand Alexander & Baldwin Inc (NYSE:ALEX) is the least popular one with only 5 bullish hedge fund positions. Compass Minerals International, Inc. (NYSE:CMP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on CMP as the stock returned 7.3% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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