Is Charah Solutions, Inc. (NYSE:CHRA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Charah Solutions, Inc. (NYSE:CHRA) has seen a decrease in hedge fund interest of late. Charah Solutions, Inc. (NYSE:CHRA) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 6 hedge funds in our database with CHRA holdings at the end of June. Our calculations also showed that CHRA 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.With all of this in mind let's take a peek at the recent hedge fund action regarding Charah Solutions, Inc. (NYSE:CHRA).
How are hedge funds trading Charah Solutions, Inc. (NYSE:CHRA)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHRA over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, George McCabe's Portolan Capital Management has the most valuable position in Charah Solutions, Inc. (NYSE:CHRA), worth close to $9.2 million, corresponding to 1% of its total 13F portfolio. On Portolan Capital Management's heels is Thomas Ellis and Todd Hammer of North Run Capital, with a $5.7 million position; 6.5% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Charah Solutions, Inc. (NYSE:CHRA), around 6.55% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, earmarking 1.04 percent of its 13F equity portfolio to CHRA.
Since Charah Solutions, Inc. (NYSE:CHRA) has witnessed declining sentiment from the smart money, it's safe to say that there is a sect of funds that decided to sell off their positions entirely heading into Q4. It's worth mentioning that Marc Majzner's Clearline Capital cut the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling about $0.2 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dropped about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Charah Solutions, Inc. (NYSE:CHRA) but similarly valued. We will take a look at Neuronetics, Inc. (NASDAQ:STIM), Milestone Scientific, Inc. (NYSE:MLSS), Outlook Therapeutics, Inc. (NASDAQ:OTLK), FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW), IEC Electronics Corp. (NYSE:IEC), Union Bankshares, Inc. (NASDAQ:UNB), and Genesis Healthcare Inc (NYSE:GEN). All of these stocks' market caps are similar to CHRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STIM,14,26688,6 MLSS,1,25,0 OTLK,8,368,4 FFNW,4,9784,-2 IEC,2,7039,0 UNB,3,1846,-1 GEN,6,3979,-2 Average,5.4,7104,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $15 million in CHRA's case. Neuronetics, Inc. (NASDAQ:STIM) is the most popular stock in this table. On the other hand Milestone Scientific, Inc. (NYSE:MLSS) is the least popular one with only 1 bullish hedge fund positions. Charah Solutions, Inc. (NYSE:CHRA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHRA is 20.9. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 28.1% in 2020 through November 23rd and surpassed the market again by 15.4 percentage points. Unfortunately CHRA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CHRA investors were disappointed as the stock returned -5.5% since the end of September (through 11/23) 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.
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Disclosure: None. This article was originally published at Insider Monkey.