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Do Hedge Funds Love Clearwater Paper Corp (CLW)?

Debasis Saha

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Clearwater Paper Corp (NYSE:CLW).

Clearwater Paper Corp (NYSE:CLW) was in 7 hedge funds' portfolios at the end of September. CLW shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. There were 8 hedge funds in our database with CLW holdings at the end of the previous quarter. Our calculations also showed that CLW 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.

5 Most Popular Stocks Among Hedge Funds

At the moment there are a large number of gauges stock market investors have at their disposal to analyze publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass their index-focused peers by a superb margin (see the details here).

[caption id="attachment_27480" align="alignnone" width="600"] Israel Englander of Millennium Management[/caption]

Izzy Englander of MILLENNIUM MANAGEMENT

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 gander at the latest hedge fund action surrounding Clearwater Paper Corp (NYSE:CLW).

What does smart money think about Clearwater Paper Corp (NYSE:CLW)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLW over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is CLW A Good Stock To Buy?

The largest stake in Clearwater Paper Corp (NYSE:CLW) was held by Sabrepoint Capital, which reported holding $10.8 million worth of stock at the end of September. It was followed by Millennium Management with a $5.3 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Paloma Partners. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Clearwater Paper Corp (NYSE:CLW), around 4.84% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to CLW.

Because Clearwater Paper Corp (NYSE:CLW) has faced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that slashed their positions entirely heading into Q4. It's worth mentioning that George Baxter's Sabrepoint Capital dropped the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $12.1 million in stock. Renaissance Technologies, also dropped its stock, about $0.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Clearwater Paper Corp (NYSE:CLW) but similarly valued. We will take a look at MagnaChip Semiconductor Corporation (NYSE:MX), Lawson Products, Inc. (NASDAQ:LAWS), Sterling Construction Company, Inc. (NASDAQ:STRL), and Tuscan Holdings Corp. (NASDAQ:THCB). This group of stocks' market valuations resemble CLW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MX,19,138277,-2 LAWS,7,16177,2 STRL,12,46140,-2 THCB,12,55008,0 Average,12.5,63901,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $21 million in CLW's case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand Lawson Products, Inc. (NASDAQ:LAWS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Clearwater Paper Corp (NYSE:CLW) is even less popular than LAWS. Hedge funds dodged a bullet by taking a bearish stance towards CLW. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CLW wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CLW investors were disappointed as the stock returned 3.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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