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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cameco Corporation (NYSE:CCJ) and determine whether hedge funds skillfully traded this stock.
Is Cameco Corporation (NYSE:CCJ) a bargain? The best stock pickers were turning less bullish. The number of long hedge fund positions were trimmed by 2 recently. Cameco Corporation (NYSE:CCJ) was in 22 hedge funds' portfolios at the end of June. The all time high for this statistics is 28. Our calculations also showed that CCJ isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with CCJ holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 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 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.
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we're going to view the fresh hedge fund action regarding Cameco Corporation (NYSE:CCJ).
How are hedge funds trading Cameco Corporation (NYSE:CCJ)?
At second quarter's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CCJ over the last 20 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, David Iben's Kopernik Global Investors has the largest position in Cameco Corporation (NYSE:CCJ), worth close to $103.8 million, comprising 18.6% of its total 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $89.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Renaissance Technologies, Amit Wadhwaney's Moerus Capital Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to Cameco Corporation (NYSE:CCJ), around 18.63% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, designating 12.71 percent of its 13F equity portfolio to CCJ.
Since Cameco Corporation (NYSE:CCJ) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their full holdings heading into Q3. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $11 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $8.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks similar to Cameco Corporation (NYSE:CCJ). These stocks are Cabot Microelectronics Corporation (NASDAQ:CCMP), Qualys Inc (NASDAQ:QLYS), MSC Industrial Direct Co Inc (NYSE:MSM), Grupo Aeroportuario del Pacifico (NYSE:PAC), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), TFS Financial Corporation (NASDAQ:TFSL), and AerCap Holdings N.V. (NYSE:AER). This group of stocks' market caps are similar to CCJ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCMP,23,163401,7 QLYS,27,168061,10 MSM,30,389200,7 PAC,7,103052,2 IOVA,43,1341814,4 TFSL,11,122677,2 AER,30,934619,-2 Average,24.4,460403,4.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $322 million in CCJ's case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 7 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. Our overall hedge fund sentiment score for CCJ is 47.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately CCJ wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CCJ investors were disappointed as the stock returned -1.5% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.