Here is What Hedge Funds Think About Heritage-Crystal Clean, Inc. (HCCI)

Is Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of long hedge fund positions moved up by 1 recently. Our calculations also showed that hcci isn’t among the 30 most popular stocks among hedge funds. HCCI was in 12 hedge funds’ portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with HCCI positions at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Carlo Cannell

Let’s check out the fresh hedge fund action surrounding Heritage-Crystal Clean, Inc. (NASDAQ:HCCI).

Hedge fund activity in Heritage-Crystal Clean, Inc. (NASDAQ:HCCI)

Heading into the second quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in HCCI 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.

No of Hedge Funds with HCCI Positions

More specifically, Cove Street Capital was the largest shareholder of Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), with a stake worth $33.2 million reported as of the end of March. Trailing Cove Street Capital was Royce & Associates, which amassed a stake valued at $16.2 million. Renaissance Technologies, Cannell Capital, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the largest position in Heritage-Crystal Clean, Inc. (NASDAQ:HCCI). Millennium Management had $0.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP and David Harding’s Winton Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) but similarly valued. We will take a look at Axcelis Technologies Inc (NASDAQ:ACLS), Heska Corp (NASDAQ:HSKA), Hanmi Financial Corp (NASDAQ:HAFC), and Construction Partners, Inc. (NASDAQ:ROAD). This group of stocks’ market valuations match HCCI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACLS 16 75026 7
HSKA 11 38274 -1
HAFC 12 37575 2
ROAD 8 13006 0
Average 11.75 40970 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $75 million in HCCI’s case. Axcelis Technologies Inc (NASDAQ:ACLS) is the most popular stock in this table. On the other hand Construction Partners, Inc. (NASDAQ:ROAD) is the least popular one with only 8 bullish hedge fund positions. Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HCCI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HCCI were disappointed as the stock returned -6.8% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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