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Were Hedge Funds Right About Canadian Solar Inc. (CSIQ)?

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Canadian Solar Inc. (NASDAQ:CSIQ).

Canadian Solar Inc. (NASDAQ:CSIQ) was in 17 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 25. CSIQ has seen an increase in support from the world's most elite money managers recently. There were 14 hedge funds in our database with CSIQ holdings at the end of December. Our calculations also showed that CSIQ isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Didric Cederholm Lion Point Capital
Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's take a peek at the key hedge fund action surrounding Canadian Solar Inc. (NASDAQ:CSIQ).

Do Hedge Funds Think CSIQ Is A Good Stock To Buy Now?

At first quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in CSIQ a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lion Point was the largest shareholder of Canadian Solar Inc. (NASDAQ:CSIQ), with a stake worth $32.6 million reported as of the end of March. Trailing Lion Point was Citadel Investment Group, which amassed a stake valued at $30 million. Arrowstreet Capital, D E Shaw, and PDT Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lion Point allocated the biggest weight to Canadian Solar Inc. (NASDAQ:CSIQ), around 5.92% of its 13F portfolio. Quaero Capital is also relatively very bullish on the stock, designating 2.79 percent of its 13F equity portfolio to CSIQ.

As one would reasonably expect, some big names have been driving this bullishness. D E Shaw, managed by D. E. Shaw, created the most valuable position in Canadian Solar Inc. (NASDAQ:CSIQ). D E Shaw had $6.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $3.6 million position during the quarter. The following funds were also among the new CSIQ investors: Matthew Hulsizer's PEAK6 Capital Management, Larry Chen and Terry Zhang's Tairen Capital, and Frank Fu's CaaS Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Canadian Solar Inc. (NASDAQ:CSIQ) but similarly valued. We will take a look at NanoString Technologies Inc (NASDAQ:NSTG), Chimera Investment Corporation (NYSE:CIM), Renewable Energy Group Inc (NASDAQ:REGI), Sogou Inc. (NYSE:SOGO), Live Oak Bancshares Inc (NASDAQ:LOB), Yelp Inc (NYSE:YELP), and TreeHouse Foods Inc. (NYSE:THS). This group of stocks' market values match CSIQ's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSTG,25,627324,-1 CIM,15,78464,-1 REGI,21,163318,5 SOGO,16,108357,0 LOB,10,113600,-7 YELP,20,513325,-11 THS,27,368885,3 Average,19.1,281896,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $96 million in CSIQ's case. TreeHouse Foods Inc. (NYSE:THS) is the most popular stock in this table. On the other hand Live Oak Bancshares Inc (NASDAQ:LOB) is the least popular one with only 10 bullish hedge fund positions. Canadian Solar Inc. (NASDAQ:CSIQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CSIQ is 49. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately CSIQ wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CSIQ investors were disappointed as the stock returned -21.4% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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