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Hedge Funds Are Nibbling On Canadian National Railway Company (CNI)

Reymerlyn Martin
·6 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Canadian National Railway Company (NYSE:CNI) based on that data and determine whether they were really smart about the stock.

Is Canadian National Railway Company (NYSE:CNI) a buy here? Prominent investors were getting more bullish. The number of long hedge fund bets improved by 2 in recent months. Canadian National Railway Company (NYSE:CNI) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that CNI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are seen as unimportant, outdated investment vehicles of years past. While there are over 8000 funds with their doors open today, Our experts look at the moguls of this group, about 850 funds. These hedge fund managers have their hands on bulk of all hedge funds' total capital, and by tracking their finest picks, Insider Monkey has uncovered numerous investment strategies that have historically outpaced the S&P 500 index. 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. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Stuart Zimmer Zimmer Partners
Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we're going to take a look at the new hedge fund action encompassing Canadian National Railway Company (NYSE:CNI).

Hedge fund activity in Canadian National Railway Company (NYSE:CNI)

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CNI over the last 20 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in Canadian National Railway Company (NYSE:CNI), which was worth $1516.9 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $132.7 million worth of shares. Arrowstreet Capital, Point72 Asset Management, and Millennium 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Canadian National Railway Company (NYSE:CNI), around 8.49% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, designating 6.01 percent of its 13F equity portfolio to CNI.

As one would reasonably expect, key hedge funds were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, created the largest position in Canadian National Railway Company (NYSE:CNI). Scopus Asset Management had $7.1 million invested in the company at the end of the quarter. Stuart J. Zimmer's Zimmer Partners also initiated a $6.6 million position during the quarter. The other funds with brand new CNI positions are Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Louis Bacon's Moore Global Investments.

Let's now review hedge fund activity in other stocks similar to Canadian National Railway Company (NYSE:CNI). These stocks are Colgate-Palmolive Company (NYSE:CL), China Petroleum & Chemical Corp (NYSE:SNP), Equinix Inc (NASDAQ:EQIX), Advanced Micro Devices, Inc. (NASDAQ:AMD), Enbridge Inc (NYSE:ENB), The TJX Companies, Inc. (NYSE:TJX), and Target Corporation (NYSE:TGT). All of these stocks' market caps match CNI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CL,50,1699344,-3 SNP,10,168521,1 EQIX,49,2314147,-6 AMD,51,2569197,-11 ENB,28,379932,3 TJX,72,2347508,3 TGT,54,3159010,0 Average,44.9,1805380,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.9 hedge funds with bullish positions and the average amount invested in these stocks was $1805 million. That figure was $2050 million in CNI's case. The TJX Companies, Inc. (NYSE:TJX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 10 bullish hedge fund positions. Canadian National Railway Company (NYSE:CNI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNI is 50.5. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on CNI as the stock returned 20.5% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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

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