Hedge Funds Dropped The Ball On CECO Environmental Corp. (CECE)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about CECO Environmental Corp. (NASDAQ:CECE) in this article.

CECO Environmental Corp. (NASDAQ:CECE) was in 9 hedge funds’ portfolios at the end of September. CECE investors should be aware of a decrease in hedge fund sentiment in recent months. There were 12 hedge funds in our database with CECE positions at the end of the previous quarter. Our calculations also showed that CECE 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.

To the average investor there are plenty of formulas stock traders put to use to analyze their holdings. Two of the less utilized formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the market by a very impressive amount (see the details here).


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to analyze the key hedge fund action encompassing CECO Environmental Corp. (NASDAQ:CECE).

How are hedge funds trading CECO Environmental Corp. (NASDAQ:CECE)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CECE over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Trigran Investments was the largest shareholder of CECO Environmental Corp. (NASDAQ:CECE), with a stake worth $37.8 million reported as of the end of September. Trailing Trigran Investments was Arrowstreet Capital, which amassed a stake valued at $2.2 million. Renaissance Technologies, Minerva Advisors, and D E Shaw 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 Trigran Investments allocated the biggest weight to CECO Environmental Corp. (NASDAQ:CECE), around 7.13% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to CECE.

Judging by the fact that CECO Environmental Corp. (NASDAQ:CECE) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few hedge funds that elected to cut their entire stakes last quarter. Interestingly, Phil Frohlich’s Prescott Group Capital Management cut the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $0.3 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund cut about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to CECO Environmental Corp. (NASDAQ:CECE). These stocks are LogicBio Therapeutics, Inc. (NASDAQ:LOGC), Pure Cycle Corporation (NASDAQ:PCYO), eGain Corporation (NASDAQ:EGAN), and FTS International, Inc. (NYSE:FTSI). This group of stocks’ market values are similar to CECE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LOGC 6 106552 0
PCYO 7 84737 0
EGAN 10 28062 -2
FTSI 14 8141 -4
Average 9.25 56873 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $45 million in CECE’s case. FTS International, Inc. (NYSE:FTSI) is the most popular stock in this table. On the other hand LogicBio Therapeutics, Inc. (NASDAQ:LOGC) is the least popular one with only 6 bullish hedge fund positions. CECO Environmental Corp. (NASDAQ:CECE) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on CECE as the stock returned 12.6% during the first two months of Q4 and outperformed the market by an even larger margin.

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