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Is CSI Compressco LP (CCLP) A Good Stock To Buy?

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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CSI Compressco LP (NASDAQ:CCLP).

Is CCLP a good stock to buy? Hedge fund interest in CSI Compressco LP (NASDAQ:CCLP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CCLP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Synacor Inc (NASDAQ:SYNC), Recro Pharma Inc (NASDAQ:REPH), and Stealth BioTherapeutics Corp (NASDAQ:MITO) to gather more data points.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Joe Huber - Huber Capital Management
Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to go over the key hedge fund action encompassing CSI Compressco LP (NASDAQ:CCLP).

Do Hedge Funds Think CCLP Is A Good Stock To Buy Now?

At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCLP over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in CSI Compressco LP (NASDAQ:CCLP) was held by Huber Capital Management, which reported holding $1 million worth of stock at the end of December. It was followed by Cyrus Capital Partners with a $0.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's check out hedge fund activity in other stocks similar to CSI Compressco LP (NASDAQ:CCLP). We will take a look at Synacor Inc (NASDAQ:SYNC), Recro Pharma Inc (NASDAQ:REPH), Stealth BioTherapeutics Corp (NASDAQ:MITO), Lake Shore Bancorp, Inc. (NASDAQ:LSBK), Avalon GloboCare Corp. (NASDAQ:AVCO), Charles & Colvard, Ltd. (NASDAQ:CTHR), and Volt Information Sciences, Inc. (NYSE:VOLT). This group of stocks' market caps resemble CCLP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYNC,7,10133,3 REPH,15,22196,2 MITO,4,3271,1 LSBK,1,294,0 AVCO,2,574,1 CTHR,4,8264,2 VOLT,5,7856,2 Average,5.4,7513,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $1 million in CCLP's case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Lake Shore Bancorp, Inc. (NASDAQ:LSBK) is the least popular one with only 1 bullish hedge fund positions. CSI Compressco LP (NASDAQ:CCLP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCLP is 27.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on CCLP as the stock returned 10.5% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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