Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 24.4% compared to 20.4%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Hedge fund interest in Clean Harbors Inc (NYSE:CLH) 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 Pure Storage, Inc. (NYSE:PSTG), Mattel, Inc. (NASDAQ:MAT), and John Bean Technologies Corporation (NYSE:JBT) to gather more data points. Our calculations also showed that CLH isn't among the 30 most popular stocks among hedge funds (view the video below). 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the fresh hedge fund action surrounding Clean Harbors Inc (NYSE:CLH).
How are hedge funds trading Clean Harbors Inc (NYSE:CLH)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLH over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Clean Harbors Inc (NYSE:CLH), which was worth $117.3 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $84.1 million worth of shares. Moreover, Impax Asset Management, Columbus Circle Investors, and Arrowstreet Capital were also bullish on Clean Harbors Inc (NYSE:CLH), allocating a large percentage of their portfolios to this stock.
Due to the fact that Clean Harbors Inc (NYSE:CLH) has experienced a decline in interest from the smart money, we can see that there is a sect of fund managers that decided to sell off their full holdings by the end of the second quarter. Intriguingly, Andrew Sandler's Sandler Capital Management dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at an estimated $30 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also said goodbye to its stock, about $12.1 million worth. These moves are interesting, 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 Clean Harbors Inc (NYSE:CLH). These stocks are Pure Storage, Inc. (NYSE:PSTG), Mattel, Inc. (NASDAQ:MAT), John Bean Technologies Corporation (NYSE:JBT), and Mercury Systems Inc (NASDAQ:MRCY). This group of stocks' market valuations resemble CLH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSTG,23,561696,2 MAT,16,650888,-5 JBT,10,101572,1 MRCY,21,111111,6 Average,17.5,356317,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $413 million in CLH's case. Pure Storage, Inc. (NYSE:PSTG) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Clean Harbors Inc (NYSE:CLH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CLH as the stock returned 8.6% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
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