Hedge Funds Staying Clear of Clearfield, Inc. (CLFD)
We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Clearfield, Inc. (NASDAQ:CLFD) based on that data.
Is Clearfield, Inc. (NASDAQ:CLFD) a buy here? The smart money is taking a pessimistic view. The number of long hedge fund bets fell by 1 recently. Our calculations also showed that CLFD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CLFD was in 3 hedge funds' portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with CLFD holdings at the end of the previous quarter.
Video: 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' 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 S&P 500 ETFs by 44 percentage points since March 2017 (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.
[caption id="attachment_746830" align="aligncenter" width="400"]
Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a peek at the new hedge fund action encompassing Clearfield, Inc. (NASDAQ:CLFD).
What does smart money think about Clearfield, Inc. (NASDAQ:CLFD)?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CLFD over the last 18 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in Clearfield, Inc. (NASDAQ:CLFD), worth close to $7.1 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Royce & Associates, led by Chuck Royce, holding a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Matthew Hulsizer's PEAK6 Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Clearfield, Inc. (NASDAQ:CLFD), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CLFD.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bailard Inc. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CLFD as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks similar to Clearfield, Inc. (NASDAQ:CLFD). These stocks are GSI Technology, Inc. (NASDAQ:GSIT), X4 Pharmaceuticals, Inc. (NASDAQ:XFOR), CIM Commercial Trust Corporation (NASDAQ:CMCT), and Nesco Holdings, Inc. (NYSE:NSCO). This group of stocks' market values are closest to CLFD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSIT,6,14193,1 XFOR,9,43341,-3 CMCT,5,11637,-2 NSCO,10,12422,0 Average,7.5,20398,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $8 million in CLFD's case. Nesco Holdings, Inc. (NYSE:NSCO) is the most popular stock in this table. On the other hand CIM Commercial Trust Corporation (NASDAQ:CMCT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Clearfield, Inc. (NASDAQ:CLFD) is even less popular than CMCT. Hedge funds dodged a bullet by taking a bearish stance towards CLFD. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately CLFD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CLFD investors were disappointed as the stock returned 14.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
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