Is Canaan (CAN) A Good Stock To Buy Now?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Canaan Inc. (NASDAQ:CAN).

Is Canaan Inc. (CAN) a good stock to buy now? CAN investors should pay attention to an increase in hedge fund sentiment recently. Canaan Inc. (NASDAQ:CAN) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a glance at the new hedge fund action encompassing Canaan Inc. (NASDAQ:CAN).

What have hedge funds been doing with Canaan Inc. (NASDAQ:CAN)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CAN over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CAN A Good Stock To Buy?

Among these funds, Millennium Management held the most valuable stake in Canaan Inc. (NASDAQ:CAN), which was worth $1.4 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $1.1 million worth of shares. CSat Investment Advisory, Marshall Wace LLP, and Paloma Partners 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 CSat Investment Advisory allocated the biggest weight to Canaan Inc. (NASDAQ:CAN), around 0.1% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to CAN.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Canaan Inc. (NASDAQ:CAN) headfirst. Point72 Asset Management, managed by Steve Cohen, established the largest position in Canaan Inc. (NASDAQ:CAN). Point72 Asset Management had $1.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.1 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Canaan Inc. (NASDAQ:CAN). We will take a look at Mercantile Bank Corp. (NASDAQ:MBWM), Ooma Inc (NYSE:OOMA), Concert Pharmaceuticals Inc (NASDAQ:CNCE), Urovant Sciences Ltd. (NASDAQ:UROV), Utah Medical Products, Inc. (NASDAQ:UTMD), Midland States Bancorp, Inc. (NASDAQ:MSBI), and The Manitowoc Company, Inc. (NYSE:MTW). This group of stocks’ market values resemble CAN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MBWM 6 17611 -1
OOMA 15 83266 -2
CNCE 16 79858 3
UROV 6 39936 -1
UTMD 7 28875 0
MSBI 10 9359 0
MTW 21 30600 2
Average 11.6 41358 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $4 million in CAN’s case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand Mercantile Bank Corp. (NASDAQ:MBWM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Canaan Inc. (NASDAQ:CAN) is even less popular than MBWM. Our overall hedge fund sentiment score for CAN is 37. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on CAN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on CAN as the stock returned 207.5% since Q3 (through November 27th) and outperformed the market by an even larger margin.

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