In this article we will take a look at whether hedge funds think Leggett & Platt, Inc. (NYSE:LEG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Leggett & Platt, Inc. (NYSE:LEG) the right pick for your portfolio? The smart money is getting less optimistic. The number of long hedge fund bets retreated by 2 recently. Our calculations also showed that LEG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). LEG was in 25 hedge funds' portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with LEG positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a multitude of tools stock market investors put to use to value their stock investments. Some of the most underrated tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite fund managers can outperform the market by a very impressive amount (see the details here).
[caption id="attachment_26092" align="aligncenter" width="399"] Joel Greenblatt of Gotham Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to view the fresh hedge fund action regarding Leggett & Platt, Inc. (NYSE:LEG).
What does smart money think about Leggett & Platt, Inc. (NYSE:LEG)?
Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in LEG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Leggett & Platt, Inc. (NYSE:LEG) was held by Renaissance Technologies, which reported holding $14.4 million worth of stock at the end of September. It was followed by Gotham Asset Management with a $9 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Leggett & Platt, Inc. (NYSE:LEG), around 0.53% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, designating 0.25 percent of its 13F equity portfolio to LEG.
Because Leggett & Platt, Inc. (NYSE:LEG) has witnessed a decline in interest from hedge fund managers, it's safe to say that there was a specific group of fund managers that decided to sell off their positions entirely in the first quarter. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners cut the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $1.4 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund sold off about $1.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Leggett & Platt, Inc. (NYSE:LEG) but similarly valued. We will take a look at Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Alaska Air Group, Inc. (NYSE:ALK), Terreno Realty Corporation (NYSE:TRNO), and BJ's Wholesale Club Holdings, Inc. (NYSE:BJ). This group of stocks' market valuations match LEG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADPT,18,1592264,-4 ALK,27,263441,-12 TRNO,10,26182,-4 BJ,26,156840,4 Average,20.25,509682,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $510 million. That figure was $71 million in LEG's case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Leggett & Platt, Inc. (NYSE:LEG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on LEG as the stock returned 34.9% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.