Is Canadian Solar Inc. (CSIQ) A Good Stock To Buy?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.

Canadian Solar Inc. (NASDAQ:CSIQ) shareholders have witnessed a decrease in hedge fund interest recently. 15 hedge funds that we track were long the stock on September 30. There were 16 hedge funds in our database with CSIQ holdings at the end of the previous quarter. At the end of this article we will also compare CSIQ to other stocks including CorVel Corporation (NASDAQ:CRVL), Rush Enterprises, Inc. (NASDAQ:RUSHB), and Chatham Lodging Trust (NYSE:CLDT) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How are hedge funds trading Canadian Solar Inc. (NASDAQ:CSIQ)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 6% dip from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CSIQ heading into this year, with ownership of the stock largely remaining flat all year. This suggests there are several long-term shareholders, but also that no one else is seeing any compelling reason to buy the stock. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Lion Point, led by Didric Cederholm, holds the biggest position in Canadian Solar Inc. (NASDAQ:CSIQ). Lion Point has a $26 million position in the stock, comprising 3.4% of its 13F portfolio. The second most bullish fund manager is Ken Hahn of Quentec Asset Management, with a $22 million position; 3% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of Phil Frohlich’s Prescott Group Capital Management, Israel Englander’s Millennium Management, and Ken Griffin’s Citadel Investment Group. We should note that Lion Point is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Canadian Solar Inc. (NASDAQ:CSIQ) has encountered bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few funds that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Jonathan Barrett and Paul Segal’s Luminus Management dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth about $2.5 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its call options, about $2 million worth, while retaining its aforementioned long position.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Canadian Solar Inc. (NASDAQ:CSIQ) but similarly valued. These stocks are CorVel Corporation (NASDAQ:CRVL), Rush Enterprises, Inc. (NASDAQ:RUSHB), Chatham Lodging Trust (NYSE:CLDT), and Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI). This group of stocks’ market caps are similar to CSIQ’s market cap.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $76 million in CSIQ’s case. CorVel Corporation (NASDAQ:CRVL) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Canadian Solar Inc. (NASDAQ:CSIQ) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None