Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in CECO Environmental Corp. (NASDAQ:CECE)? The smart money sentiment can provide an answer to this question.
Is CECE a good stock to buy now? CECO Environmental Corp. (NASDAQ:CECE) has seen an increase in support from the world’s most elite money managers in recent months. CECO Environmental Corp. (NASDAQ:CECE) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that CECE 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 21st century investor’s toolkit there are several gauges investors have at their disposal to size up stocks. Some of the most underrated gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outperform the market by a solid margin (see the details here).
Now let’s take a glance at the new hedge fund action encompassing CECO Environmental Corp. (NASDAQ:CECE).
Do Hedge Funds Think CECE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in CECE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Trigran Investments, managed by Douglas T. Granat, holds the largest position in CECO Environmental Corp. (NASDAQ:CECE). Trigran Investments has a $41.6 million position in the stock, comprising 7.5% of its 13F portfolio. On Trigran Investments’s heels is Chuck Royce of Royce & Associates, with a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David P. Cohen’s Minerva Advisors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to CECO Environmental Corp. (NASDAQ:CECE), around 7.53% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, dishing out 0.73 percent of its 13F equity portfolio to CECE.
Consequently, key hedge funds were breaking ground themselves. Royce & Associates, managed by Chuck Royce, initiated the largest position in CECO Environmental Corp. (NASDAQ:CECE). Royce & Associates had $2.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) also initiated a $0 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CECO Environmental Corp. (NASDAQ:CECE) but similarly valued. We will take a look at RADA Electronic Industries Ltd. (NASDAQ:RADA), GasLog Ltd (NYSE:GLOG), Citizens & Northern Corporation (NASDAQ:CZNC), Uxin Limited (NASDAQ:UXIN), Tellurian Inc. (NASDAQ:TELL), International Tower Hill Mines Ltd (NYSE:THM), and Applied Optoelectronics Inc (NASDAQ:AAOI). This group of stocks’ market caps resemble CECE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $49 million in CECE’s case. Applied Optoelectronics Inc (NASDAQ:AAOI) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks CECO Environmental Corp. (NASDAQ:CECE) is more popular among hedge funds. Our overall hedge fund sentiment score for CECE is 72. 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. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately CECE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CECE were disappointed as the stock returned 3.7% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.