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Hedge Funds Are Souring On Compass Minerals International, Inc. (CMP)

Debasis Saha

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Compass Minerals International, Inc. (NYSE:CMP).

Compass Minerals International, Inc. (NYSE:CMP) investors should pay attention to a decrease in support from the world's most elite money managers lately. CMP was in 13 hedge funds' portfolios at the end of September. There were 16 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 (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.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

According to most traders, hedge funds are perceived as slow, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at present, Our experts choose to focus on the top tier of this group, approximately 750 funds. It is estimated that this group of investors command bulk of the smart money's total asset base, and by shadowing their unrivaled picks, Insider Monkey has unearthed a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually 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 .

David Winters
David Winters

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's view the new hedge fund action surrounding Compass Minerals International, Inc. (NYSE:CMP).

How have hedgies been trading Compass Minerals International, Inc. (NYSE:CMP)?

At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMP over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TCK A Good Stock To Buy?
Is TCK A Good Stock To Buy?

The largest stake in Compass Minerals International, Inc. (NYSE:CMP) was held by 40 North Management, which reported holding $71.5 million worth of stock at the end of September. It was followed by Cove Street Capital with a $40.5 million position. Other investors bullish on the company included Citadel Investment Group, Harvest Capital Strategies, and Lodge Hill Capital. In terms of the portfolio weights assigned to each position Harvest Capital Strategies allocated the biggest weight to Compass Minerals International, Inc. (NYSE:CMP), around 6.52% of its 13F portfolio. 40 North Management is also relatively very bullish on the stock, dishing out 6.39 percent of its 13F equity portfolio to CMP.

Judging by the fact that Compass Minerals International, Inc. (NYSE:CMP) has experienced falling interest from the smart money, logic holds that there was a specific group of hedgies who were dropping their full holdings in the third quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $4.6 million in stock. Wallace Weitz's fund, Wallace R. Weitz & Co., also dropped its stock, about $4.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.

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 Horace Mann Educators Corporation (NYSE:HMN), LGI Homes Inc (NASDAQ:LGIH), The RealReal, Inc. (NASDAQ:REAL), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). All of these stocks' market caps match CMP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMN,13,35454,1 LGIH,14,130437,2 REAL,20,83144,-13 AGIO,17,103178,-1 Average,16,88053,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $140 million in CMP's case. The RealReal, Inc. (NASDAQ:REAL) is the most popular stock in this table. On the other hand Horace Mann Educators Corporation (NYSE:HMN) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Compass Minerals International, Inc. (NYSE:CMP) is even less popular than HMN. Hedge funds dodged a bullet by taking a bearish stance towards CMP. 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 CMP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CMP investors were disappointed as the stock returned -0.9% 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.

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