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 Lincoln National Corporation (NYSE:LNC)? The smart money sentiment can provide an answer to this question.
Lincoln National Corporation (NYSE:LNC) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that LNC isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several methods stock market investors put to use to evaluate publicly traded companies. Some of the most underrated methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best fund managers can outperform the broader indices by a very impressive amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the recent hedge fund action regarding Lincoln National Corporation (NYSE:LNC).
Hedge fund activity in Lincoln National Corporation (NYSE:LNC)
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LNC over the last 16 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Lincoln National Corporation (NYSE:LNC), which was worth $144.1 million at the end of the second quarter. On the second spot was GLG Partners which amassed $137.8 million worth of shares. Moreover, AQR Capital Management, East Side Capital (RR Partners), and Millennium Management were also bullish on Lincoln National Corporation (NYSE:LNC), allocating a large percentage of their portfolios to this stock.
Seeing as Lincoln National Corporation (NYSE:LNC) has experienced a decline in interest from the smart money, we can see that there was a specific group of funds that slashed their entire stakes heading into Q3. Intriguingly, Clint Carlson's Carlson Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $27 million in stock, and Daniel Johnson's Gillson Capital was right behind this move, as the fund dumped about $11.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Lincoln National Corporation (NYSE:LNC). We will take a look at Citrix Systems, Inc. (NASDAQ:CTXS), IDEX Corporation (NYSE:IEX), Yandex NV (NASDAQ:YNDX), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks' market values are similar to LNC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTXS,34,2028377,0 IEX,15,374953,-1 YNDX,30,826000,0 CAG,24,608316,-9 Average,25.75,959412,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $959 million. That figure was $620 million in LNC's case. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this table. On the other hand IDEX Corporation (NYSE:IEX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Lincoln National Corporation (NYSE:LNC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LNC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LNC were disappointed as the stock returned -5.9% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.