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Hedge Funds Have Never Been This Bullish On Sociedad Química y Minera de Chile S.A. (SQM)

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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sociedad Química y Minera de Chile S.A. (NYSE:SQM).

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) was in 26 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SQM has experienced an increase in hedge fund interest of late. There were 19 hedge funds in our database with SQM positions at the end of the second quarter. Our calculations also showed that SQM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let's take a look at the fresh hedge fund action regarding Sociedad Química y Minera de Chile S.A. (NYSE:SQM).

Michael Gelband of ExodusPoint Capital

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

Heading into the fourth quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from the second quarter of 2021. By comparison, 12 hedge funds held shares or bullish call options in SQM a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sociedad Química y Minera de Chile S.A. (NYSE:SQM) was held by Millennium Management, which reported holding $46.3 million worth of stock at the end of September. It was followed by Scopus Asset Management with a $44 million position. Other investors bullish on the company included Balyasny Asset Management, ExodusPoint Capital, and SailingStone Capital Partners. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Sociedad Química y Minera de Chile S.A. (NYSE:SQM), around 3.28% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, earmarking 3.02 percent of its 13F equity portfolio to SQM.

As one would reasonably expect, key money managers have jumped into Sociedad Química y Minera de Chile S.A. (NYSE:SQM) headfirst. ExodusPoint Capital, managed by Michael Gelband, established the most valuable position in Sociedad Química y Minera de Chile S.A. (NYSE:SQM). ExodusPoint Capital had $16.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $9.6 million position during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, Jay Chen's Himension Capital, and Javier Velazquez's Albar Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sociedad Química y Minera de Chile S.A. (NYSE:SQM) but similarly valued. We will take a look at Paylocity Holding Corp (NASDAQ:PCTY), Nomura Holdings, Inc. (NYSE:NMR), The AES Corporation (NYSE:AES), Incyte Corporation (NASDAQ:INCY), Arch Capital Group Ltd. (NASDAQ:ACGL), Smith & Nephew plc (NYSE:SNN), and Avalara, Inc. (NYSE:AVLR). All of these stocks' market caps resemble SQM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCTY,27,740385,8 NMR,6,19317,-1 AES,47,1481369,8 INCY,37,3295444,3 ACGL,31,1214570,9 SNN,19,106245,6 AVLR,24,1070703,-5 Average,27.3,1132576,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $1133 million. That figure was $212 million in SQM's case. The AES Corporation (NYSE:AES) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SQM is 64.4. 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 negative signal and 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately SQM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SQM investors were disappointed as the stock returned 6.8% since the end of September (through 12/9) 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 in 2021.

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