World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
United States Steel Corporation (NYSE:X) was in 24 hedge funds' portfolios at the end of December. X investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. There were 32 hedge funds in our database with X holdings at the end of the previous quarter. Our calculations also showed that x isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the fresh hedge fund action encompassing United States Steel Corporation (NYSE:X).
How are hedge funds trading United States Steel Corporation (NYSE:X)?
At Q4's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards X over the last 14 quarters. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Luminus Management held the most valuable stake in United States Steel Corporation (NYSE:X), which was worth $101.9 million at the end of the third quarter. On the second spot was Bridgewater Associates which amassed $66.9 million worth of shares. Moreover, Pelham Capital, Citadel Investment Group, and Arrowstreet Capital were also bullish on United States Steel Corporation (NYSE:X), allocating a large percentage of their portfolios to this stock.
Since United States Steel Corporation (NYSE:X) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few money managers that decided to sell off their full holdings by the end of the third quarter. Intriguingly, David Greenspan's Slate Path Capital cut the largest stake of the 700 funds monitored by Insider Monkey, totaling close to $56.7 million in stock. Robert Polak's fund, Anchor Bolt Capital, also sold off its stock, about $27.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 8 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to United States Steel Corporation (NYSE:X). These stocks are Viper Energy Partners LP (NASDAQ:VNOM), Guardant Health, Inc. (NASDAQ:GH), MorphoSys AG (NASDAQ:MOR), and Vermilion Energy Inc (NYSE:VET). All of these stocks' market caps are closest to X's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNOM,10,49481,-2 GH,7,81964,7 MOR,9,50915,4 VET,7,40542,-2 Average,8.25,55726,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $374 million in X's case. Viper Energy Partners LP (NASDAQ:VNOM) is the most popular stock in this table. On the other hand Guardant Health, Inc. (NASDAQ:GH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks United States Steel Corporation (NYSE:X) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately X wasn't nearly as popular as these 15 stock and hedge funds that were betting on X were disappointed as the stock returned -11.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.