Hedge Funds Were Buying Clearfield, Inc. (CLFD) On The Dip

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

After spiking in late-July, shares of Clearfield, Inc. (NASDAQ:CLFD) trended down for the rest of the third quarter and ended the period down by nearly 16%. That didn’t stop the investors tracked by Insider Monkey from adding more taking up more positions in the stock. CLFD was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. There were 5 hedge funds in our database with CLFD holdings at the end of the second quarter. The value of their collective positions also witnessed a slight uptick, despite the aforementioned decline in shares during that period.

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 Old Second Bancorp Inc. (NASDAQ:OSBC), Affimed NV (NASDAQ:AFMD), and Stonegate Mortageg Corp (NYSE:SGM) to gather more data points.

In today’s marketplace there are numerous gauges stock market investors can use to assess stocks. A couple of the best gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can beat the S&P 500 by a superb amount (see the details here).

With all of this in mind, let’s take a gander at the recent action encompassing Clearfield, Inc. (NASDAQ:CLFD).

Hedge fund activity in Clearfield, Inc. (NASDAQ:CLFD)

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 40% jump from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or had already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Clearfield, Inc. (NASDAQ:CLFD), worth close to $6 million, amounting to less than 0.1% of its total 13F portfolio. The second-most bullish fund manager is Chuck Royce’s Royce & Associates, with a $1.6 million position; the mutual fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain Joseph A. Jolson’s Harvest Capital Strategies, and Ken Griffin’s Citadel Investment Group.

As industrywide interest jumped, some big names were leading the bulls’ herd. Citadel Investment Group assembled the most outsized position in Clearfield, Inc. (NASDAQ:CLFD). Citadel Investment Group had $0.2 million invested in shares of the company underlying call options. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Clearfield, Inc. (NASDAQ:CLFD). These stocks are Old Second Bancorp Inc. (NASDAQ:OSBC), Affimed NV (NASDAQ:AFMD), Stonegate Mortageg Corp (NYSE:SGM), and Journal Media Group Inc (NYSE:JMG). All of these stocks’ market caps are similar to CLFD’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $10 million in CLFD’s case. Journal Media Group Inc (NYSE:JMG) is the most popular stock in this table. On the other hand Old Second Bancorp Inc. (NASDAQ:OSBC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Clearfield, Inc. (NASDAQ:CLFD) is only as popular as OSBC, and has less capital invested in it. 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 firmly behind this stock yet, though its interest is growing.