The world's largest funds or mega funds, managing between $100 billion and over a trillion dollars, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, together control almost a third of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities. In this article, we examine based on our research of their latest available Q3 institutional 13-F filings stocks in the chemicals group that they are most bullish and bearish about.
Taken together, these mega managers are bullish on the group, adding a net $591 million to their prior $123.24 billion prior quarter holdings in the group, and they are under-weight in the group by a factor of 0.84 (for more general information on these mega funds, please look at the end of the article). The following are the chemicals group companies that mega fund managers are bullish about, and that are also trading at a discount to their peers in the group (see Table):
Lyondellbasell Industries NV (NYSE:LYB): LYB is a Netherlands-based manufacturer of polypropylene compounds, propylene oxide, polyethylene, ethylene and propylene. Mega funds added a net $448 million in Q3 to their $4.37 billion prior quarter position. The top buyer was AllianceBernstein ($191 million), and the top holder was Fidelity Investments ($1.7 billion). LYB has been trading up recently and is almost flat for the year (up about 10%), and it trades at 8-9 forward P/E and 1.6 P/B compared to averages of 10.8 and 2.6 for the diversified chemicals group.
Huntsman Corp. (NYSE:HUN): HUN is engaged in the manufacture and sale of differentiated organic and inorganic chemical products worldwide for use in a variety of industrial and consumer applications. Mega funds added a net $79 million in Q3 to their $524 million prior quarter position. The top buyers were Capital World Investors ($38 million) and Goldman Sachs ($31 million), and the top holders were Vanguard Group ($86 million) and Capital World Investors ($75 million). HUN trades at 5-6 forward P/E and 1.4 P/B compared to averages of 10.8 and 2.6 for the diversified chemicals group.
Agrium Inc. (NYSE:AGU): AGU manufactures nitrogen, potash, and phosphate-based fertilizers and other agricultural products for markets worldwide, and it is also involved in the retail supply of agricultural products and services in North and South America. Mega funds added a net $84 million in Q3 to their prior $1.24 billion position. The top buyer was Wellington Capital Management ($82 million), and the top holders were Royal Bank of Canada ($355 million) and Wellington Capital Management ($239 million). AGU trades at 9 forward P/E and 1.9 P/B compared to averages of 10.1 and 3.6 for its peers in the fertilizer group.
The following are additional chemicals group companies that mega fund managers are bullish about, but that are not trading at a discount to their peer (see Table):
Dow Chemical Co. (NYSE:DOW): DOW is a science and technology company that manufactures plastic, chemical and agricultural products for the global food, transportation, health and medicine, personal and home care, and building construction markets. Mega funds added a net $209 million in Q3 to their $17.52 billion prior quarter position, with the top buyers being Capital Research Global Investors ($616 million) and Capital World Investors ($448 million). DOW trades at a premium 11-12 forward P/E and 1.9 P/B compared to averages of 10.8 and 2.6 for the diversified chemicals group.
Mosaic Inc. (NYSE:MOS): The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients for the global agriculture industry. Mega funds added a net $1.37 billion in Q3 to their $4.38 billion prior quarter position in the company, with the top buyers being State Street Corp. ($338 million) and Vanguard Group ($237 million), and the top holder being Wellington Capital Management ($971 million). MOS has been weak this year, down over 30% YTD, and trades at 10-11 forward P/E and 2.1 P/B compared to averages of 10.1 and 3.6 for its peers in the fertilizer group, while earnings are projected to increase from $4.38 in 2011 to $5.48 in 2013 at an annual growth rate of 11.9%.
Potash Corporation of Saskatchewan, Inc. (NYSE:POT): POT is the world's largest integrated fertilizer and related industrial and feed products company by capacity. Mega funds added a net $306 million in Q3 to its $8.17 billion prior quarter position. The top buyers were Capital World Investors ($265 million) and Goldman Sachs ($247 million), and the top holder was Capital World Investors ($2.17 billion). POT trades at a fair 10-11 forward P/E and 5.0 P/B compared to averages of 10.1 and 3.6 for its peers in the fertilizer group, while earnings are projected to more than double from $1.97 in 2010 to $4.12 in 2012.
Other companies in the chemicals group that mega funds are bearish on (see Table) include diversified chemicals company DuPont De Nemours & Co. (NYSE:DD), in which they cut a net $215 million in Q3; chemicals, plastics and fibers manufacturer Eastman Chemical Co. (NYSE:EMN), in which they cut a net $118 million; chlorovinyl and aromatics chemicals, and vinyl-based building and home improvement products manufacturer Georgia Gulf Corp. (GGC), in which they cut a net $29 million; and basic chemicals, vinyl's, polymers and fabricated polyvinyl chloride (PVC) manufacturer Westlake Chemical Corp. (NYSE:WLK), in which they cut a net $29 million.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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