Hedge Funds Cashing Out Of CSX Corporation (CSX)

·6 min read

In this article we will take a look at whether hedge funds think CSX Corporation (NYSE:CSX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is CSX Corporation (NYSE:CSX) ready to rally soon? The smart money was reducing their bets on the stock. The number of bullish hedge fund positions dropped by 5 recently. CSX Corporation (NYSE:CSX) was in 53 hedge funds' portfolios at the end of March. The all time high for this statistic is 63. Our calculations also showed that CSX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 58 hedge funds in our database with CSX positions at the end of the fourth quarter.

If you'd ask most stock holders, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are over 8000 funds trading at present, Our experts hone in on the leaders of this club, about 850 funds. Most estimates calculate that this group of people watch over the majority of the smart money's total asset base, and by watching their top investments, Insider Monkey has brought to light a few investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy beat 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 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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 we're going to take a look at the fresh hedge fund action regarding CSX Corporation (NYSE:CSX).

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

At the end of March, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 57 hedge funds held shares or bullish call options in CSX a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CSX A Good Stock To Buy?
Is CSX A Good Stock To Buy?

Among these funds, Egerton Capital Limited held the most valuable stake in CSX Corporation (NYSE:CSX), which was worth $908.3 million at the end of the fourth quarter. On the second spot was Soroban Capital Partners which amassed $814.4 million worth of shares. Fisher Asset Management, Holocene Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Soroban Capital Partners allocated the biggest weight to CSX Corporation (NYSE:CSX), around 6.97% of its 13F portfolio. 11 Capital Partners is also relatively very bullish on the stock, setting aside 5.46 percent of its 13F equity portfolio to CSX.

Seeing as CSX Corporation (NYSE:CSX) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that elected to cut their entire stakes heading into Q2. At the top of the heap, Robert Pitts's Steadfast Capital Management cut the biggest investment of the 750 funds followed by Insider Monkey, worth an estimated $206.1 million in stock. Dipak Patel's fund, Alight Capital, also dropped its stock, about $9.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q2.

Let's check out hedge fund activity in other stocks similar to CSX Corporation (NYSE:CSX). We will take a look at Baidu, Inc. (NASDAQ:BIDU), Activision Blizzard, Inc. (NASDAQ:ATVI), ConocoPhillips (NYSE:COP), NetEase, Inc (NASDAQ:NTES), Chubb Limited (NYSE:CB), Becton, Dickinson and Company (NYSE:BDX), and Illinois Tool Works Inc. (NYSE:ITW). This group of stocks' market valuations are similar to CSX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIDU,89,6572291,38 ATVI,76,3580901,-5 COP,51,1205455,2 NTES,32,3501491,-6 CB,41,1605208,7 BDX,65,3732947,0 ITW,33,411615,-7 Average,55.3,2944273,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 55.3 hedge funds with bullish positions and the average amount invested in these stocks was $2944 million. That figure was $3700 million in CSX's case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand NetEase, Inc (NASDAQ:NTES) is the least popular one with only 32 bullish hedge fund positions. CSX Corporation (NYSE:CSX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CSX is 43.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately CSX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CSX investors were disappointed as the stock returned 1.1% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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