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Hedge Funds Have Never Been More Bullish On Clarus Corporation (CLAR)

Nina Todic

We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Clarus Corporation (NASDAQ:CLAR).

Clarus Corporation (NASDAQ:CLAR) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds' portfolios at the end of the first quarter of 2019. 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 Gladstone Investment Corporation (NASDAQ:GAIN), MiX Telematics Limited (NYSE:MIXT), and Regalwood Global Energy Ltd. (NYSE:RWGE) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Nelson Obus, Wynnefield Capital
Nelson Obus, Wynnefield Capital

Let's take a glance at the latest hedge fund action surrounding Clarus Corporation (NASDAQ:CLAR).

How are hedge funds trading Clarus Corporation (NASDAQ:CLAR)?

Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CLAR over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CLAR Positions
No of Hedge Funds with CLAR Positions

More specifically, Greenhouse Funds was the largest shareholder of Clarus Corporation (NASDAQ:CLAR), with a stake worth $26.9 million reported as of the end of March. Trailing Greenhouse Funds was Renaissance Technologies, which amassed a stake valued at $12.2 million. Wynnefield Capital, Arrowstreet Capital, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Clarus Corporation (NASDAQ:CLAR) has experienced declining sentiment from the smart money, it's easy to see that there was a specific group of funds who were dropping their positions entirely heading into Q3. It's worth mentioning that Mark Broach's Manatuck Hill Partners dumped the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising close to $2.8 million in stock. Frederick DiSanto's fund, Ancora Advisors, also said goodbye to its stock, about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to Clarus Corporation (NASDAQ:CLAR). We will take a look at Gladstone Investment Corporation (NASDAQ:GAIN), MiX Telematics Limited (NYSE:MIXT), Regalwood Global Energy Ltd. (NYSE:RWGE), and Smart & Final Stores Inc (NYSE:SFS). This group of stocks' market caps are similar to CLAR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GAIN,7,3922,3 MIXT,8,52028,1 RWGE,14,133850,0 SFS,12,24066,-2 Average,10.25,53467,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $55 million in CLAR's case. Regalwood Global Energy Ltd. (NYSE:RWGE) is the most popular stock in this table. On the other hand Gladstone Investment Corporation (NASDAQ:GAIN) is the least popular one with only 7 bullish hedge fund positions. Clarus Corporation (NASDAQ:CLAR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on CLAR as the stock returned 7.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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