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Hedge Funds Renew Interest In Celestica Inc. (CLS)

In this article we will check out the progression of hedge fund sentiment towards Celestica Inc. (NYSE:CLS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Celestica Inc. (NYSE:CLS) investors should be aware of an increase in hedge fund interest in recent months. CLS was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 13 hedge funds in our database with CLS holdings at the end of the previous quarter. Our calculations also showed that CLS 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.

In the eyes of most shareholders, hedge funds are perceived as slow, old financial vehicles of the past. While there are over 8000 funds in operation at the moment, We look at the top tier of this club, approximately 850 funds. It is estimated that this group of investors orchestrate most of the smart money’s total asset base, and by keeping track of their first-class stock picks, Insider Monkey has come up with several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action regarding Celestica Inc. (NYSE:CLS).

How have hedgies been trading Celestica Inc. (NYSE:CLS)?

Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CLS over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Celestica Inc. (NYSE:CLS), which was worth $23 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $9.3 million worth of shares. D E Shaw, Renaissance Technologies, and Citadel Investment Group 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 Nishkama Capital allocated the biggest weight to Celestica Inc. (NYSE:CLS), around 0.79% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, earmarking 0.72 percent of its 13F equity portfolio to CLS.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Engineers Gate Manager, managed by Greg Eisner, assembled the most valuable position in Celestica Inc. (NYSE:CLS). Engineers Gate Manager had $0.2 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Joel Greenblatt’s Gotham Asset Management and Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Celestica Inc. (NYSE:CLS) but similarly valued. We will take a look at Global Cord Blood Corp (NYSE:CO), MagnaChip Semiconductor Corporation (NYSE:MX), PDF Solutions, Inc. (NASDAQ:PDFS), and Myers Industries, Inc. (NYSE:MYE). This group of stocks’ market caps are similar to CLS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CO 13 18445 1
MX 22 153806 -5
PDFS 12 19073 0
MYE 13 71362 0
Average 15 65672 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $48 million in CLS’s case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand PDF Solutions, Inc. (NASDAQ:PDFS) is the least popular one with only 12 bullish hedge fund positions. Celestica Inc. (NYSE:CLS) 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on CLS as the stock returned 84.6% 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.