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Hedge Funds Are Buying Clean Harbors Inc (CLH)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Clean Harbors Inc (NYSE:CLH).

Is Clean Harbors Inc (NYSE:CLH) undervalued? The smart money is in a bullish mood. The number of long hedge fund bets rose by 1 in recent months. 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 March. 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.

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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the new hedge fund action encompassing 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 long this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in CLH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CLH A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Clean Harbors Inc (NYSE:CLH), with a stake worth $77.1 million reported as of the end of September. Trailing Renaissance Technologies was Impax Asset Management, which amassed a stake valued at $49.7 million. 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, setting aside 1.7 percent of its 13F equity portfolio to CLH.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the biggest 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 made a $8.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Murray’s Lodge Hill Capital, Benjamin A. Smith’s Laurion Capital Management, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Clean Harbors Inc (NYSE:CLH) but similarly valued. We will take a look at Stifel Financial Corp. (NYSE:SF), Texas Roadhouse Inc (NASDAQ:TXRH), Verint Systems Inc. (NASDAQ:VRNT), and Janus Henderson Group plc (NYSE:JHG). All of these stocks’ market caps resemble CLH’s market cap.

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 13.9% in 2020 through June 10th but beat the market by 14.2 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 22.7% 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.