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Were Hedge Funds Right About CF Industries Holdings, Inc. (CF)?

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  • CF
  • ^GSPC

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider CF Industries Holdings, Inc. (NYSE:CF) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

CF Industries Holdings, Inc. (NYSE:CF) investors should be aware of an increase in activity from the world's largest hedge funds lately. CF Industries Holdings, Inc. (NYSE:CF) was in 47 hedge funds' portfolios at the end of June. The all time high for this statistic is 50. There were 44 hedge funds in our database with CF holdings at the end of March. Our calculations also showed that CF isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts hone in on the crème de la crème of this club, around 850 funds. It is estimated that this group of investors oversee bulk of the hedge fund industry's total asset base, and by keeping an eye on their inimitable equity investments, Insider Monkey has deciphered various investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Zilvinas Zach Mecelis Covalis Capital
Zilvinas Zach Mecelis Covalis Capital

Zilvinas Mecelis of Covalis Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. 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. 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 homepage. Keeping this in mind let's review the recent hedge fund action regarding CF Industries Holdings, Inc. (NYSE:CF).

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

At the end of the second quarter, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in CF a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Matthew Barrett's Glendon Capital Management has the number one position in CF Industries Holdings, Inc. (NYSE:CF), worth close to $217.9 million, amounting to 14.1% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $111.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Josh Donfeld and David Rogers's Castle Hook Partners, Ben Jacobs's Anomaly Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Glendon Capital Management allocated the biggest weight to CF Industries Holdings, Inc. (NYSE:CF), around 14.1% of its 13F portfolio. Brightline Capital is also relatively very bullish on the stock, dishing out 9 percent of its 13F equity portfolio to CF.

As aggregate interest increased, specific money managers have jumped into CF Industries Holdings, Inc. (NYSE:CF) headfirst. Covalis Capital, managed by Zilvinas Mecelis, established the most outsized position in CF Industries Holdings, Inc. (NYSE:CF). Covalis Capital had $19.9 million invested in the company at the end of the quarter. Stanley Druckenmiller's Duquesne Capital also made a $10 million investment in the stock during the quarter. The other funds with new positions in the stock are Alexander Mitchell's Scopus Asset Management, Noam Gottesman's GLG Partners, and Andrew Sandler's Sandler Capital Management.

Let's now review hedge fund activity in other stocks similar to CF Industries Holdings, Inc. (NYSE:CF). We will take a look at Intellia Therapeutics, Inc. (NASDAQ:NTLA), Darling Ingredients Inc. (NYSE:DAR), Lightspeed Commerce Inc. (NYSE:LSPD), Repligen Corporation (NASDAQ:RGEN), ICON Public Limited Company (NASDAQ:ICLR), Magellan Midstream Partners, L.P. (NYSE:MMP), and Teva Pharmaceutical Industries Limited (NYSE:TEVA). This group of stocks' market valuations match CF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTLA,41,2282192,12 DAR,41,839147,8 LSPD,29,649487,8 RGEN,35,1285346,-3 ICLR,39,1301455,10 MMP,13,89137,-1 TEVA,22,947100,-2 Average,31.4,1056266,4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $1056 million. That figure was $956 million in CF's case. Intellia Therapeutics, Inc. (NASDAQ:NTLA) is the most popular stock in this table. On the other hand Magellan Midstream Partners, L.P. (NYSE:MMP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks CF Industries Holdings, Inc. (NYSE:CF) is more popular among hedge funds. Our overall hedge fund sentiment score for CF is 86.2. 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 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 returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on CF as the stock returned 15.8% since the end of June (through 11/5) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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