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How Did Clean Harbors Inc (CLH) Perform In Comparison to Hedge Fund Favorites in 2019?

Debasis Saha

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds' moves. In this article, we look at what those funds think of Clean Harbors Inc (NYSE:CLH) based on that data.

Is Clean Harbors Inc (NYSE:CLH) a cheap investment today? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets shrunk by 1 recently. Our calculations also showed that CLH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). CLH was in 26 hedge funds' portfolios at the end of the third quarter of 2019. There were 27 hedge funds in our database with CLH holdings at the end of the previous quarter.

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_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

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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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we're going to take a look at the fresh hedge fund action regarding Clean Harbors Inc (NYSE:CLH).

What does smart money think about Clean Harbors Inc (NYSE:CLH)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CLH over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CLH A Good Stock To Buy?

The largest stake in Clean Harbors Inc (NYSE:CLH) was held by Renaissance Technologies, which reported holding $136.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $61.6 million position. Other investors bullish on the company included Impax Asset Management, Columbus Circle Investors, and Sandler Capital Management. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to Clean Harbors Inc (NYSE:CLH), around 3.9% of its 13F portfolio. Columbus Circle Investors is also relatively very bullish on the stock, setting aside 1.56 percent of its 13F equity portfolio to CLH.

Judging by the fact that Clean Harbors Inc (NYSE:CLH) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, Israel Englander's Millennium Management dumped the biggest investment of all the hedgies followed by Insider Monkey, comprising about $3.6 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also dumped its stock, about $3.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Clean Harbors Inc (NYSE:CLH) but similarly valued. These stocks are Qurate Retail, Inc. (NASDAQ:QRTEA), The Stars Group Inc. (NASDAQ:TSG), Ritchie Bros. Auctioneers (NYSE:RBA), and CIT Group Inc. (NYSE:CIT). This group of stocks' market values resemble CLH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRTEA,32,735658,-1 TSG,34,717299,-4 RBA,13,185553,1 CIT,27,810397,2 Average,26.5,612227,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $612 million. That figure was $388 million in CLH's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers (NYSE:RBA) is the least popular one with only 13 bullish hedge fund positions. Clean Harbors Inc (NYSE:CLH) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on CLH as the stock returned 73.8% in 2019 and outclassed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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