In this article we will check out the progression of hedge fund sentiment towards Canaan Inc. (NASDAQ:CAN) 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.
Canaan Inc. (NASDAQ:CAN) was in 3 hedge funds’ portfolios at the end of March. CAN investors should pay attention to an increase in hedge fund interest recently. There were 2 hedge funds in our database with CAN positions at the end of the previous quarter. Our calculations also showed that CAN 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.
At the moment there are dozens of metrics shareholders can use to size up their stock investments. A duo of the most useful metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top money managers can beat the broader indices by a healthy amount (see the details here).
Israel Englander of Millennium Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 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 take a look at the recent hedge fund action regarding Canaan Inc. (NASDAQ:CAN).
What does smart money think about Canaan Inc. (NASDAQ:CAN)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAN over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, CSat Investment Advisory held the most valuable stake in Canaan Inc. (NASDAQ:CAN), which was worth $0.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.1 million worth of shares. Millennium Management was 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 0.14% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0001 percent of its 13F equity portfolio to CAN.
As one would reasonably expect, key hedge funds have been driving this bullishness. CSat Investment Advisory, managed by Claes Fornell, assembled the largest position in Canaan Inc. (NASDAQ:CAN). CSat Investment Advisory had $0.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.1 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Canaan Inc. (NASDAQ:CAN) but similarly valued. We will take a look at Genesis Energy, L.P. (NYSE:GEL), B. Riley Financial, Inc. (NASDAQ:RILY), Vectrus Inc (NYSE:VEC), and Kala Pharmaceuticals, Inc. (NASDAQ:KALA). This group of stocks’ market values are similar to CAN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GEL | 4 | 7087 | 3 |
| RILY | 14 | 71858 | -2 |
| VEC | 15 | 55085 | 2 |
| KALA | 18 | 183294 | 8 |
| Average | 12.75 | 79331 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $1 million in CAN’s case. Kala Pharmaceuticals, Inc. (NASDAQ:KALA) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Canaan Inc. (NASDAQ:CAN) is even less popular than GEL. 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 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on CAN as the stock returned 25.7% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.