The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Clean Harbors Inc (NYSE:CLH) from the perspective of those elite funds.
Is Clean Harbors Inc (NYSE:CLH) a healthy stock for your portfolio? The smart money is buying. The number of long hedge fund bets inched up by 5 in recent months. Our calculations also showed that CLH isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to analyze the latest hedge fund action surrounding Clean Harbors Inc (NYSE:CLH).
How have hedgies been trading Clean Harbors Inc (NYSE:CLH)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CLH over the last 13 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Clean Harbors Inc (NYSE:CLH), with a stake worth $99.4 million reported as of the end of September. Trailing Renaissance Technologies was Impax Asset Management, which amassed a stake valued at $47.5 million. 12th Street Asset Management, Sandler Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the most outsized call position in Clean Harbors Inc (NYSE:CLH). PEAK6 Capital Management had $4.2 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $4 million investment in the stock during the quarter. The following funds were also among the new CLH investors: Matthew Hulsizer’s PEAK6 Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Clean Harbors Inc (NYSE:CLH). These stocks are Corelogic Inc (NYSE:CLGX), First Financial Bankshares Inc (NASDAQ:FFIN), Axon Enterprise, Inc. (NASDAQ:AAXN), and Kirkland Lake Gold Ltd. (NYSE:KL). All of these stocks’ market caps are similar to CLH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLGX | 20 | 378350 | 4 |
| FFIN | 6 | 10038 | 0 |
| AAXN | 16 | 439775 | -12 |
| KL | 20 | 170961 | 5 |
| Average | 15.5 | 249781 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $239 million in CLH’s case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 6 bullish hedge fund positions. Clean Harbors Inc (NYSE:CLH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CLGX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
