Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Cameco Corporation (NYSE:CCJ) makes for a good investment right now.
Cameco Corporation (NYSE:CCJ) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that CCJ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Burbank of Passport Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the recent hedge fund action encompassing Cameco Corporation (NYSE:CCJ).
How are hedge funds trading Cameco Corporation (NYSE:CCJ)?
Heading into the first quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in CCJ a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Cameco Corporation (NYSE:CCJ), with a stake worth $113.4 million reported as of the end of September. Trailing Adage Capital Management was Kopernik Global Investors, which amassed a stake valued at $102.2 million. Rubric Capital Management, Moerus Capital Management, and Yost Capital Management 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 Kopernik Global Investors allocated the biggest weight to Cameco Corporation (NYSE:CCJ), around 18.33% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, designating 11.09 percent of its 13F equity portfolio to CCJ.
Now, specific money managers were leading the bulls’ herd. Passport Capital, managed by John Burbank, established the most valuable position in Cameco Corporation (NYSE:CCJ). Passport Capital had $8.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1 million position during the quarter. The following funds were also among the new CCJ investors: Donald Sussman’s Paloma Partners, John Orrico’s Water Island Capital, and Mika Toikka’s AlphaCrest Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cameco Corporation (NYSE:CCJ) but similarly valued. These stocks are Tandem Diabetes Care Inc (NASDAQ:TNDM), Associated Banc Corp (NYSE:ASB), Qurate Retail, Inc. (NASDAQ:QRTEA), and Liberty Global PLC LiLAC Class A (NASDAQ:LILA). This group of stocks’ market caps are similar to CCJ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TNDM | 39 | 518462 | 2 |
| ASB | 24 | 191911 | 1 |
| QRTEA | 39 | 710121 | 4 |
| LILA | 11 | 170779 | -3 |
| Average | 28.25 | 397818 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $329 million in CCJ’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Liberty Global PLC LiLAC Class A (NASDAQ:LILA) is the least popular one with only 11 bullish hedge fund positions. Cameco Corporation (NYSE:CCJ) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CCJ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CCJ investors were disappointed as the stock returned -27.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
