After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Clearwater Paper Corp (NYSE:CLW).
Clearwater Paper Corp (NYSE:CLW) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of March. At the end of this article we will also compare CLW to other stocks including Ryerson Holding Corporation (NYSE:RYI), U.S. Xpress Enterprises, Inc. (NYSE:USX), and Consolidated-Tomoka Land Co. (NYSE:CTO) to get a better sense of its popularity.
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.
Let's analyze the key hedge fund action regarding Clearwater Paper Corp (NYSE:CLW).
What have hedge funds been doing with Clearwater Paper Corp (NYSE:CLW)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CLW over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Clearwater Paper Corp (NYSE:CLW) was held by Sabrepoint Capital, which reported holding $12.6 million worth of stock at the end of March. It was followed by Sabrepoint Capital with a $5.8 million position. Other investors bullish on the company included Arrowstreet Capital, Renaissance Technologies, and Citadel Investment Group.
Seeing as Clearwater Paper Corp (NYSE:CLW) has faced bearish sentiment from hedge fund managers, it's easy to see that there were a few money managers who were dropping their positions entirely in the third quarter. Interestingly, Gilchrist Berg's Water Street Capital cut the largest investment of all the hedgies watched by Insider Monkey, worth about $4.5 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also cut its stock, about $0.7 million worth. These moves are important to note, as total 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 Clearwater Paper Corp (NYSE:CLW). We will take a look at Ryerson Holding Corporation (NYSE:RYI), U.S. Xpress Enterprises, Inc. (NYSE:USX), Consolidated-Tomoka Land Co. (NYSE:CTO), and Aquantia Corp. (NYSE:AQ). All of these stocks' market caps are closest to CLW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYI,11,15814,3 USX,12,35594,-1 CTO,8,123882,0 AQ,13,21754,6 Average,11,49261,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $20 million in CLW's case. Aquantia Corp. (NYSE:AQ) is the most popular stock in this table. On the other hand Consolidated-Tomoka Land Co. (NYSE:CTO) is the least popular one with only 8 bullish hedge fund positions. Clearwater Paper Corp (NYSE:CLW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately CLW wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CLW investors were disappointed as the stock returned -1.6% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.