Is CECO Environmental Corp. (CECE) Going to Burn These Hedge Funds?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like CECO Environmental Corp. (NASDAQ:CECE) .

CECO Environmental Corp. (NASDAQ:CECE) was in 18 hedge funds’ portfolios at the end of September. CECE shareholders have witnessed an increase in hedge fund sentiment recently. There were 12 hedge funds in our database with CECE holdings at the end of the previous quarter. At the end of this article we will also compare CECE to other stocks including Pioneer Energy Services Corp (NYSE:PES), Tarena International Inc(ADR) (NASDAQ:TEDU), and Bank of Marin Bancorp (NASDAQ:BMRC) to get a better sense of its popularity.

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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.

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How are hedge funds trading CECO Environmental Corp. (NASDAQ:CECE)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 50% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in CECE at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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According to Insider Monkey’s hedge fund database, Trigran Investments, led by Douglas T. Granat, holds the number one position in CECO Environmental Corp. (NASDAQ:CECE). Trigran Investments has a $20.6 million position in the stock, comprising 5.4% of its 13F portfolio. Coming in second is Rutabaga Capital Management, led by Peter Schliemann, holding a $5.6 million position; 1.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Charles Frumberg’s Emancipation Capital, Paul Hondros’ AlphaOne Capital Partners and Israel Englander’s Millennium Management. We should note that none of these hedge funds are 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.

Consequently, key hedge funds have jumped into CECO Environmental Corp. (NASDAQ:CECE) headfirst. Brant Point Investment Management, led by Ira Unschuld, assembled the largest position in CECO Environmental Corp. (NASDAQ:CECE). Brant Point Investment Management had $3 million invested in the company at the end of the quarter. Robert B. Gillam’s McKinley Capital Management also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Glenn Russell Dubin’s Highbridge Capital Management, and Neil Chriss’ Hutchin Hill Capital.

Let’s check out hedge fund activity in other stocks similar to CECO Environmental Corp. (NASDAQ:CECE). These stocks are Pioneer Energy Services Corp (NYSE:PES), Tarena International Inc(ADR) (NASDAQ:TEDU), Bank of Marin Bancorp (NASDAQ:BMRC), and Nova Measuring Instruments Ltd. (NASDAQ:NVMI). This group of stocks’ market values are similar to CECE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PES 10 4083 -1
TEDU 7 22223 -1
BMRC 5 23383 -1
NVMI 5 30424 -1

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $49 million in CECE’s case. Pioneer Energy Services Corp (NYSE:PES) is the most popular stock in this table. On the other hand Bank of Marin Bancorp (NASDAQ:BMRC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks CECO Environmental Corp. (NASDAQ:CECE) 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