U.S. Markets close in 1 hr 26 mins

Were Hedge Funds Right About Flocking Into CVR Energy, Inc. (CVI) ?

Nina Todic

How do we determine whether CVR Energy, Inc. (NYSE:CVI) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

CVR Energy, Inc. (NYSE:CVI) was in 22 hedge funds' portfolios at the end of December. CVI investors should pay attention to an increase in hedge fund sentiment lately. There were 21 hedge funds in our database with CVI positions at the end of the previous quarter. Our calculations also showed that cvi isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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.

Most Popular Stocks Among Hedge Funds

Let's analyze the fresh hedge fund action encompassing CVR Energy, Inc. (NYSE:CVI).

What does the smart money think about CVR Energy, Inc. (NYSE:CVI)?

At Q4's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CVI over the last 14 quarters. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

No of Hedge Funds With CVI Positions

More specifically, Icahn Capital LP was the largest shareholder of CVR Energy, Inc. (NYSE:CVI), with a stake worth $2454.9 million reported as of the end of September. Trailing Icahn Capital LP was Millennium Management, which amassed a stake valued at $31.5 million. Renaissance Technologies, Citadel Investment Group, and HBK Investments were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, assembled the most valuable position in CVR Energy, Inc. (NYSE:CVI). Blue Mountain Capital had $5.5 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.9 million investment in the stock during the quarter. The following funds were also among the new CVI investors: Peter Algert and Kevin Coldiron's Algert Coldiron Investors and Matthew Tewksbury's Stevens Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CVR Energy, Inc. (NYSE:CVI) but similarly valued. These stocks are Helen of Troy Limited (NASDAQ:HELE), Mattel, Inc. (NASDAQ:MAT), Emcor Group Inc (NYSE:EME), and Ryman Hospitality Properties, Inc. (NYSE:RHP). This group of stocks' market valuations are similar to CVI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HELE,17,134005,5 MAT,15,546082,-1 EME,18,194966,-2 RHP,18,407097,-6 Average,17,320538,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $2577 million in CVI's case. Emcor Group Inc (NYSE:EME) is the most popular stock in this table. On the other hand Mattel, Inc. (NASDAQ:MAT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks CVR Energy, Inc. (NYSE:CVI) 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. Hedge funds were also right about betting on CVI as the stock returned 27.5% 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.

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

Related Content