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Did Hedge Funds Make The Right Call On Clean Harbors Inc (CLH) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Clean Harbors Inc (NYSE:CLH) and determine whether hedge funds skillfully traded this stock.

Is Clean Harbors Inc (NYSE:CLH) a bargain? The best stock pickers were becoming hopeful. The number of bullish hedge fund bets went up by 1 recently. Our calculations also showed that CLH 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). CLH was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with CLH positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andrew Sandler of Sandler Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let’s take a gander at the latest hedge fund action regarding Clean Harbors Inc (NYSE:CLH).

Hedge fund activity in Clean Harbors Inc (NYSE:CLH)

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CLH over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is CLH A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Clean Harbors Inc (NYSE:CLH), which was worth $77.1 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $49.7 million worth of shares. AQR Capital Management, 12th Street Asset Management, and Point72 Asset Management 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 12th Street Asset Management allocated the biggest weight to Clean Harbors Inc (NYSE:CLH), around 6.79% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 1.7 percent of its 13F equity portfolio to CLH.

Consequently, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Clean Harbors Inc (NYSE:CLH). Point72 Asset Management had $16.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $8.3 million position during the quarter. The other funds with brand new CLH positions are Clint Murray’s Lodge Hill Capital, Benjamin A. Smith’s Laurion Capital Management, and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks similar to Clean Harbors Inc (NYSE:CLH). These stocks are Stifel Financial Corp. (NYSE:SF), Texas Roadhouse Inc (NASDAQ:TXRH), Verint Systems Inc. (NASDAQ:VRNT), and Janus Henderson Group plc (NYSE:JHG). This group of stocks’ market values match CLH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SF 17 106242 2
TXRH 27 146523 4
VRNT 17 205592 2
JHG 23 124117 5
Average 21 145619 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $244 million in CLH’s case. Texas Roadhouse Inc (NASDAQ:TXRH) is the most popular stock in this table. On the other hand Stifel Financial Corp. (NYSE:SF) is the least popular one with only 17 bullish hedge fund positions. Clean Harbors Inc (NYSE:CLH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately CLH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CLH were disappointed as the stock returned 16.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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