Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Casella Waste Systems Inc. (NASDAQ:CWST) and see how the stock is affected by the recent hedge fund activity.
Hedge fund interest in Casella Waste Systems Inc. (NASDAQ:CWST) 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 Amicus Therapeutics, Inc. (NASDAQ:FOLD), WESCO International, Inc. (NYSE:WCC), and Workiva Inc (NYSE:WK) to gather more data points. Our calculations also showed that CWST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_221556" align="aligncenter" width="450"] Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action surrounding Casella Waste Systems Inc. (NASDAQ:CWST).
What does smart money think about Casella Waste Systems Inc. (NASDAQ:CWST)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CWST over the last 17 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Casella Waste Systems Inc. (NASDAQ:CWST) was held by Renaissance Technologies, which reported holding $118.5 million worth of stock at the end of September. It was followed by Portolan Capital Management with a $13.1 million position. Other investors bullish on the company included Two Sigma Advisors, GAMCO Investors, and Driehaus Capital. In terms of the portfolio weights assigned to each position Portolan Capital Management allocated the biggest weight to Casella Waste Systems Inc. (NASDAQ:CWST), around 1.48% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, setting aside 0.65 percent of its 13F equity portfolio to CWST.
Judging by the fact that Casella Waste Systems Inc. (NASDAQ:CWST) has experienced a decline in interest from hedge fund managers, it's safe to say that there were a few money managers that elected to cut their full holdings heading into Q4. At the top of the heap, Israel Englander's Millennium Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $6.6 million in stock. Ken Griffin's fund, Citadel Investment Group, also sold off its stock, about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Casella Waste Systems Inc. (NASDAQ:CWST). We will take a look at Amicus Therapeutics, Inc. (NASDAQ:FOLD), WESCO International, Inc. (NYSE:WCC), Workiva Inc (NYSE:WK), and TowneBank (NASDAQ:TOWN). All of these stocks' market caps resemble CWST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOLD,26,690584,-3 WCC,18,446217,0 WK,19,172864,-1 TOWN,6,45663,-1 Average,17.25,338832,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $167 million in CWST's case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. Casella Waste Systems Inc. (NASDAQ:CWST) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CWST, though not to the same extent, as the stock returned 8.8% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.