Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
CSW Industrials Inc (NASDAQ:CSWI) has seen an increase in support from the world’s most successful money managers recently. CSWI was in 9 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with CSWI holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Aegean Marine Petroleum Network Inc. (NYSE:ANW), Tower International Inc (NYSE:TOWR), and GenMark Diagnostics, Inc (NASDAQ:GNMK) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
crystal51/Shutterstock.com
What have hedge funds been doing with CSW Industrials Inc (NASDAQ:CSWI)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 13% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in CSWI at the beginning of this year. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Noah Levy and Eugene Dozortsev of Newtyn Management holds the biggest position in CSW Industrials Inc (NASDAQ:CSWI). Newtyn Management has a $25.4 million position in the stock, comprising 6% of its 13F portfolio. The second largest stake is held by Michael M. Rothenberg of Moab Capital Partners which holds a $16.8 million position; 5.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass Martin Whitman’s Third Avenue Management, and Jim Simons’ Renaissance Technologies, which is one of the largest hedge funds in the world. We should note that Moab Capital Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, some big names have been driving this bullishness. Jeffrey Bronchick of Cove Street Capital assembled the biggest position in CSW Industrials Inc (NASDAQ:CSWI). Cove Street Capital had $16.4 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CSW Industrials Inc (NASDAQ:CSWI) but similarly valued. We will take a look at Aegean Marine Petroleum Network Inc. (NYSE:ANW), Tower International Inc (NYSE:TOWR), GenMark Diagnostics, Inc (NASDAQ:GNMK), and Enanta Pharmaceuticals Inc (NASDAQ:ENTA). This group of stocks’ market caps are similar to CSWI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANW | 16 | 106189 | 0 |
| TOWR | 13 | 67177 | -3 |
| GNMK | 11 | 96641 | 5 |
| ENTA | 12 | 66193 | 2 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $71 million in CSWI’s case. Aegean Marine Petroleum Network Inc. (NYSE:ANW) is the most popular stock in this table. On the other hand GenMark Diagnostics, Inc (NASDAQ:GNMK) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks CSW Industrials Inc (NASDAQ:CSWI) is even less popular than GNMK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
