Hedge Funds Are Dumping Constellium SE (CSTM)

·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Constellium SE (NYSE:CSTM).

Is Constellium SE (NYSE:CSTM) worth your attention right now? Hedge funds were reducing their bets on the stock. The number of long hedge fund bets were trimmed by 8 in recent months. Constellium SE (NYSE:CSTM) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 50. Our calculations also showed that CSTM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Robert Pohly of Samlyn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now we're going to take a look at the fresh hedge fund action regarding Constellium SE (NYSE:CSTM).

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

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in CSTM a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CSTM A Good Stock To Buy?
Is CSTM A Good Stock To Buy?

More specifically, Sachem Head Capital was the largest shareholder of Constellium SE (NYSE:CSTM), with a stake worth $71.3 million reported as of the end of June. Trailing Sachem Head Capital was Nut Tree Capital, which amassed a stake valued at $62.5 million. Samlyn Capital, Bronson Point Partners, and Schonfeld Strategic Advisors 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 Bronson Point Partners allocated the biggest weight to Constellium SE (NYSE:CSTM), around 16.67% of its 13F portfolio. Nut Tree Capital is also relatively very bullish on the stock, dishing out 12.95 percent of its 13F equity portfolio to CSTM.

Because Constellium SE (NYSE:CSTM) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that decided to sell off their entire stakes last quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $51.4 million in stock. Alexander Mitchell's fund, Scopus Asset Management, also sold off its stock, about $20.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Constellium SE (NYSE:CSTM). We will take a look at Allegheny Technologies Incorporated (NYSE:ATI), Microvision, Inc. (NASDAQ:MVIS), Crescent Point Energy Corp (NYSE:CPG), The ODP Corporation (NYSE:ODP), The St. Joe Company (NYSE:JOE), Cinemark Holdings, Inc. (NYSE:CNK), and iRobot Corporation (NASDAQ:IRBT). All of these stocks' market caps are similar to CSTM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATI,28,269671,8 MVIS,11,68467,-1 CPG,13,105057,0 ODP,23,462625,-1 JOE,15,1231582,-2 CNK,32,316144,2 IRBT,19,63072,2 Average,20.1,359517,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $360 million. That figure was $365 million in CSTM's case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand Microvision, Inc. (NASDAQ:MVIS) is the least popular one with only 11 bullish hedge fund positions. Constellium SE (NYSE:CSTM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSTM is 54.3. 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 positive signal but 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately CSTM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CSTM were disappointed as the stock returned 1% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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

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