Cramer: CSX Is the Template on Hedgies

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Here's your marching orders for right now, into the Christmas rally. While I never say you can't forget the fundamentals, hence my earlier piece about Ingersoll Rand (IR Quote) et al., I believe the first-quarter story will be the return of the gated sellers.

There were two stories all 2008 -- what will happen to the company you own, and what will happen to the stock you own. We know from the overreaction in stocks that the there was a total divergence beginning with the peak in commodities in July. Stocks that hedge funds owned -- all the natural gas stocks like XTO (XTO Quote), Cabot (COG Quote), Chesapeake (CHK Quote) and Anadarko (APC Quote); and the oil service plays, specifically National Oilwell Varco (NOV Quote) and Schlumberger (SLB Quote); as well as infrastructure plays like Jacobs (JEC Quote), Fluor (FLR Quote), Foster Wheeler (FWLT Quote), McDermott (MDR Quote), Shaw (SGR Quote) and Trinity (TRN Quote) -- were just destroyed. Same with the steels, like Nucor (NUE Quote) and U.S. Steel (X Quote). Same with the ag stocks: Potash (POT Quote), Mosaic (MOS Quote) and Agrium (AGU Quote).

They all lifted at the exact same time, when the major hedge funds suspected withdrawals. Not when the fundamentals bottomed. You needed to know more about the holders than about the stocks. Think of it like this. Goldman Sachs put out a list of stocks most vulnerable to hedge fund redemptions. At the top? National Oilwell Varco.

What has happened to the stock? It plummeted from $92 to $17. The stock bottomed while oil was in free fall, slicing through the $70s, $60s and $50s.

Then it began to rally, up more than 50% when oil went through the $40s! As it is a company that needs oil to go much higher to justify continuing to build expensive drilling platforms, it should have kept plummeting. But the big hedge fund owners stopped their selling because they decided not to return money to investors.