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 complex research processes 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 pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves.
Is Chase Corporation (NYSEAMEX:CCF) the right investment to pursue these days? The smart money is becoming less confident. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that CCF isn’t among the 30 most popular stocks among hedge funds (see the video below). CCF was in 8 hedge funds’ portfolios at the end of June. There were 9 hedge funds in our database with CCF holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are perceived as underperforming, old financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, We choose to focus on the aristocrats of this club, approximately 750 funds. These money managers handle bulk of the smart money’s total asset base, and by paying attention to their inimitable picks, Insider Monkey has deciphered many investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the recent hedge fund action regarding Chase Corporation (NYSEAMEX:CCF).
How have hedgies been trading Chase Corporation (NYSEAMEX:CCF)?
Heading into the third quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCF over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Chase Corporation (NYSEAMEX:CCF) was held by Renaissance Technologies, which reported holding $40.7 million worth of stock at the end of March. It was followed by Royce & Associates with a $22.6 million position. Other investors bullish on the company included Minerva Advisors, Steamboat Capital Partners, and Winton Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CCF as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to Chase Corporation (NYSEAMEX:CCF). We will take a look at M/A-COM Technology Solutions Holdings (NASDAQ:MTSI), Turning Point Brands, Inc. (NYSE:TPB), Sandstorm Gold Ltd. (NYSE:SAND), and Kadant Inc. (NYSE:KAI). All of these stocks’ market caps are similar to CCF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTSI | 17 | 176112 | 1 |
| TPB | 14 | 63437 | -2 |
| SAND | 15 | 61450 | 3 |
| KAI | 11 | 66354 | -6 |
| Average | 14.25 | 91838 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $85 million in CCF’s case. M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) is the most popular stock in this table. On the other hand Kadant Inc. (NYSE:KAI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Chase Corporation (NYSEAMEX:CCF) is even less popular than KAI. Hedge funds dodged a bullet by taking a bearish stance towards CCF. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CCF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CCF investors were disappointed as the stock returned 1.6% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
