While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding ChampionX Corporation (NASDAQ:CHX).
Is ChampionX Corporation (NASDAQ:CHX) the right investment to pursue these days? The best stock pickers were becoming hopeful. The number of long hedge fund bets increased by 2 recently. ChampionX Corporation (NASDAQ:CHX) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CHX 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Jeffrey Gates of Gates 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. With all of this in mind let's take a peek at the latest hedge fund action regarding ChampionX Corporation (NASDAQ:CHX).
Do Hedge Funds Think CHX Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the first quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in CHX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Gates Capital Management held the most valuable stake in ChampionX Corporation (NASDAQ:CHX), which was worth $121.6 million at the end of the second quarter. On the second spot was Paradice Investment Management which amassed $115.4 million worth of shares. Iridian Asset Management, D E Shaw, and East Side Capital (RR Partners) 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 Paradice Investment Management allocated the biggest weight to ChampionX Corporation (NASDAQ:CHX), around 5.36% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, designating 5.04 percent of its 13F equity portfolio to CHX.
As industrywide interest jumped, key hedge funds have jumped into ChampionX Corporation (NASDAQ:CHX) headfirst. Royce & Associates, managed by Chuck Royce, established the largest position in ChampionX Corporation (NASDAQ:CHX). Royce & Associates had $4.8 million invested in the company at the end of the quarter. Jinghua Yan's TwinBeech Capital also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager, Renaissance Technologies, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now review hedge fund activity in other stocks similar to ChampionX Corporation (NASDAQ:CHX). These stocks are WESCO International, Inc. (NYSE:WCC), ASGN Incorporated (NYSE:ASGN), Armstrong World Industries, Inc. (NYSE:AWI), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Blueprint Medicines Corporation (NASDAQ:BPMC), New York Community Bancorp, Inc. (NYSE:NYCB), and Travel + Leisure Co. (NYSE:TNL). This group of stocks' market valuations resemble CHX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WCC,23,1196955,-5 ASGN,15,59880,-5 AWI,17,595141,-8 RETA,18,305350,-6 BPMC,36,848485,5 NYCB,30,393811,5 TNL,30,668680,0 Average,24.1,581186,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $525 million in CHX's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand ASGN Incorporated (NYSE:ASGN) is the least popular one with only 15 bullish hedge fund positions. ChampionX Corporation (NASDAQ:CHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHX is 72.7. 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. 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 still beat the market by 4.5 percentage points. Hedge funds were also right about betting on CHX as the stock returned 2.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.