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Is The Mosaic Company (MOS) Going to Burn These Hedge Funds?

Nina Todic

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.

The Mosaic Company (NYSE:MOS) was in 29 hedge funds' portfolios at the end of March. MOS investors should pay attention to a decrease in support from the world's most elite money managers in recent months. There were 37 hedge funds in our database with MOS positions at the end of the previous quarter. Our calculations also showed that mos 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Phill Gross, Adage Capital Management

Let's take a glance at the recent hedge fund action encompassing The Mosaic Company (NYSE:MOS).

Hedge fund activity in The Mosaic Company (NYSE:MOS)

At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards MOS over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MOS Positions

The largest stake in The Mosaic Company (NYSE:MOS) was held by Citadel Investment Group, which reported holding $248.9 million worth of stock at the end of March. It was followed by Adage Capital Management with a $223.2 million position. Other investors bullish on the company included Millennium Management, East Side Capital (RR Partners), and AQR Capital Management.

Because The Mosaic Company (NYSE:MOS) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that slashed their full holdings heading into Q3. Interestingly, David Greenspan's Slate Path Capital sold off the largest stake of all the hedgies watched by Insider Monkey, valued at close to $89.5 million in stock. Ryan Caldwell's fund, Chiron Investment Management, also dropped its stock, about $40.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks similar to The Mosaic Company (NYSE:MOS). These stocks are Burlington Stores Inc (NYSE:BURL), Jacobs Engineering Group Inc (NYSE:JEC), The Ultimate Software Group, Inc. (NASDAQ:ULTI), and Enel Americas S.A. (NYSE:ENIA). This group of stocks' market values are closest to MOS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BURL,31,1351671,1 JEC,33,1008926,0 ULTI,35,1420211,15 ENIA,14,151897,3 Average,28.25,983176,4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $983 million. That figure was $771 million in MOS's case. The Ultimate Software Group, Inc. (NASDAQ:ULTI) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 14 bullish hedge fund positions. The Mosaic Company (NYSE:MOS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately MOS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MOS were disappointed as the stock returned -22.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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