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Hedge Funds Never Been Less Bullish On CECO Environmental Corp. (CECE)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of CECO Environmental Corp. (NASDAQ:CECE) based on that data.

CECO Environmental Corp. (NASDAQ:CECE) investors should be aware of a decrease in support from the world’s most elite money managers lately. CECE was in 7 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 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 Q1 rankings and see the video for a quick look at the top 5 stocks).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to review the fresh hedge fund action regarding CECO Environmental Corp. (NASDAQ:CECE).

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

At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CECE over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Trigran Investments held the most valuable stake in CECO Environmental Corp. (NASDAQ:CECE), which was worth $26.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.1 million worth of shares. Minerva Advisors, Renaissance Technologies, 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 5.8% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, dishing out 0.54 percent of its 13F equity portfolio to CECE.

Since CECO Environmental Corp. (NASDAQ:CECE) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few funds that slashed their entire stakes in the first quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest position of the 750 funds monitored by Insider Monkey, valued at close to $0.3 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CECO Environmental Corp. (NASDAQ:CECE) but similarly valued. These stocks are Griffin Industrial Realty, Inc. (NASDAQ:GRIF), Spero Therapeutics, Inc. (NASDAQ:SPRO), U.S. Xpress Enterprises, Inc. (NYSE:USX), and Gaia, Inc. (NASDAQ:GAIA). This group of stocks’ market values match CECE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRIF 4 25050 1
SPRO 7 27260 0
USX 7 1063 1
GAIA 11 30002 2
Average 7.25 20844 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $30 million in CECE’s case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand Griffin Industrial Realty, Inc. (NASDAQ:GRIF) is the least popular one with only 4 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 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 and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on CECE as the stock returned 46% during the second quarter and outperformed the market by an even larger margin.

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