Should You Buy Clearwater Paper Corp (CLW)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Clearwater Paper Corp (NYSE:CLW).

Hedge fund interest in Clearwater Paper Corp shares was flat at the end of last quarter. This is usually a negative indicator. 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 Scientific Games Corp (NASDAQ:SGMS), Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP), and QLogic Corporation (NASDAQ:QLGC) to gather more data points.

Now, let’s take a look at the fresh action surrounding Clearwater Paper Corp (NYSE:CLW).

What have hedge funds been doing with Clearwater Paper Corp (NYSE:CLW)?

According to Insider Monkey’s hedge fund database, Corsair Capital Management, managed by Jay Petschek and Steven Major, holds the number one position in Clearwater Paper Corp (NYSE:CLW). Corsair Capital Management has a $18.4 million position in the stock, comprising 1.9% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, managed by Jim Simons, which holds a $5.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Jacob Gottlieb’s Visium Asset Management, D. E. Shaw’s D E Shaw and Steve Cohen’s Point72 Asset Management.

It’s worth mentioning that Israel Englander’s Millennium Management sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $18.9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dropped about $5.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

On the next page, we analyze hedge fund activity of similarly priced stocks to get a better feel on what the elite funds think of CLW.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Clearwater Paper Corp (NYSE:CLW) but similarly valued. These stocks are Scientific Games Corp (NASDAQ:SGMS), Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP), QLogic Corporation (NASDAQ:QLGC), and MTS Systems Corporation (NASDAQ:MTSC). All of these stocks’ market caps are closest to CLW’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $40 million in CLW’s case. Scientific Games Corp (NASDAQ:SGMS) is the most popular stock in this table. On the other hand MTS Systems Corporation (NASDAQ:MTSC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Clearwater Paper Corp (NYSE:CLW) is even less popular than MTSC. 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.