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Hedge Funds Are Buying Canadian Solar Inc. (CSIQ)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Canadian Solar Inc. (NASDAQ:CSIQ).

Canadian Solar Inc. (NASDAQ:CSIQ) was in 17 hedge funds’ portfolios at the end of September. CSIQ has seen an increase in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with CSIQ holdings at the end of the previous quarter. Our calculations also showed that CSIQ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action surrounding Canadian Solar Inc. (NASDAQ:CSIQ).

How are hedge funds trading Canadian Solar Inc. (NASDAQ:CSIQ)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in CSIQ a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Lion Point held the most valuable stake in Canadian Solar Inc. (NASDAQ:CSIQ), which was worth $73.6 million at the end of the third quarter. On the second spot was Electron Capital Partners which amassed $9.9 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and Marshall Wace 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 8.21% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, setting aside 1.44 percent of its 13F equity portfolio to CSIQ.

Consequently, specific money managers have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Canadian Solar Inc. (NASDAQ:CSIQ). Marshall Wace had $6 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $0.7 million investment in the stock during the quarter. The other funds with brand new CSIQ positions are Benjamin A. Smith’s Laurion Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and David Harding’s Winton Capital Management.

Let’s check out 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 Gossamer Bio, Inc. (NASDAQ:GOSS), TriCo Bancshares (NASDAQ:TCBK), Matthews International Corporation (NASDAQ:MATW), and AMC Entertainment Holdings Inc (NYSE:AMC). This group of stocks’ market caps resemble CSIQ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOSS 9 161966 -2
TCBK 9 44155 1
MATW 9 37537 -4
AMC 12 97465 -4
Average 9.75 85281 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $115 million in CSIQ’s case. AMC Entertainment Holdings Inc (NYSE:AMC) is the most popular stock in this table. On the other hand Gossamer Bio, Inc. (NASDAQ:GOSS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Canadian Solar Inc. (NASDAQ:CSIQ) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CSIQ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSIQ were disappointed as the stock returned -13.4% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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