The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of CECO Environmental Corp. (NASDAQ:CECE) and find out how it is affected by hedge funds' moves.
Is CECO Environmental Corp. (NASDAQ:CECE) an outstanding investment today? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions improved by 3 lately. Our calculations also showed that CECE isn't among the 30 most popular stocks among hedge funds. CECE was in 14 hedge funds' portfolios at the end of March. There were 11 hedge funds in our database with CECE positions at the end of the previous quarter.
In the eyes of most traders, hedge funds are viewed as slow, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, We choose to focus on the elite of this club, around 750 funds. Most estimates calculate that this group of people orchestrate the majority of all hedge funds' total asset base, and by keeping an eye on their first-class investments, Insider Monkey has formulated several investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We're going to take a gander at the new hedge fund action encompassing CECO Environmental Corp. (NASDAQ:CECE).
How are hedge funds trading CECO Environmental Corp. (NASDAQ:CECE)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CECE over the last 15 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Trigran Investments was the largest shareholder of CECO Environmental Corp. (NASDAQ:CECE), with a stake worth $34.2 million reported as of the end of March. Trailing Trigran Investments was D E Shaw, which amassed a stake valued at $1.5 million. Renaissance Technologies, Arrowstreet Capital, and Minerva Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into CECO Environmental Corp. (NASDAQ:CECE) headfirst. Minerva Advisors, managed by David P. Cohen, initiated the most valuable position in CECO Environmental Corp. (NASDAQ:CECE). Minerva Advisors had $1.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.2 million investment in the stock during the quarter. The other funds with brand new CECE positions are Thomas Bailard's Bailard Inc and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CECO Environmental Corp. (NASDAQ:CECE) but similarly valued. We will take a look at Western New England Bancorp, Inc. (NASDAQ:WNEB), Mersana Therapeutics, Inc. (NASDAQ:MRSN), Era Group Inc (NYSE:ERA), and Dova Pharmaceuticals, Inc. (NASDAQ:DOVA). All of these stocks' market caps match CECE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WNEB,4,22374,-1 MRSN,16,76424,12 ERA,9,44209,2 DOVA,4,28867,0 Average,8.25,42969,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $41 million in CECE's case. Mersana Therapeutics, Inc. (NASDAQ:MRSN) is the most popular stock in this table. On the other hand Western New England Bancorp, Inc. (NASDAQ:WNEB) is the least popular one with only 4 bullish hedge fund positions. CECO Environmental Corp. (NASDAQ:CECE) 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 CECE as the stock returned 23.3% 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.