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Should You Buy Canadian Solar Inc. (CSIQ)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Canadian Solar Inc. (NASDAQ:CSIQ) investors should be aware of an increase in hedge fund interest in recent months. CSIQ was in 15 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with CSIQ holdings at the end of the previous quarter. Our calculations also showed that csiq isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ken Griffin

Let’s check out the fresh hedge fund action encompassing Canadian Solar Inc. (NASDAQ:CSIQ).

What does the smart money think about Canadian Solar Inc. (NASDAQ:CSIQ)?

Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 114% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CSIQ over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CSIQ Positions

More specifically, Lion Point was the largest shareholder of Canadian Solar Inc. (NASDAQ:CSIQ), with a stake worth $53.7 million reported as of the end of September. Trailing Lion Point was Luminus Management, which amassed a stake valued at $38.7 million. Park West Asset Management, Citadel Investment Group, and Brigade Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key money managers have been driving this bullishness. Brigade Capital, managed by Don Morgan, initiated the most valuable position in Canadian Solar Inc. (NASDAQ:CSIQ). Brigade Capital had $3.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new CSIQ investors: Steve Cohen’s Point72 Asset Management, Noam Gottesman’s GLG Partners, and Philip Hempleman’s Ardsley Partners.

Let’s also examine hedge fund activity in other stocks similar to Canadian Solar Inc. (NASDAQ:CSIQ). These stocks are Stoneridge, Inc. (NYSE:SRI), American Outdoor Brands Corporation (NASDAQ:AOBC), CalAmp Corp. (NASDAQ:CAMP), and Global Cord Blood Corporation (NYSE:CO). This group of stocks’ market caps are closest to CSIQ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRI 18 103714 1
AOBC 19 113000 3
CAMP 17 63050 0
CO 7 31573 -2
Average 15.25 77834 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $128 million in CSIQ’s case. American Outdoor Brands Corporation (NASDAQ:AOBC) is the most popular stock in this table. On the other hand Global Cord Blood Corporation (NYSE:CO) is the least popular one with only 7 bullish hedge fund positions. Canadian Solar Inc. (NASDAQ:CSIQ) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AOBC might be a better candidate to consider a long position.

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

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