There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Lamar Advertising Co (NASDAQ:LAMR).
Is Lamar Advertising Co (NASDAQ:LAMR) a bargain? The smart money is turning bullish. The number of bullish hedge fund bets inched up by 4 lately. Our calculations also showed that LAMR isn't among the 30 most popular stocks among hedge funds (view the video below). LAMR was in 24 hedge funds' portfolios at the end of June. There were 20 hedge funds in our database with LAMR holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
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 surrounding Lamar Advertising Co (NASDAQ:LAMR).
How have hedgies been trading Lamar Advertising Co (NASDAQ:LAMR)?
At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in LAMR 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.
Among these funds, Renaissance Technologies held the most valuable stake in Lamar Advertising Co (NASDAQ:LAMR), which was worth $165.7 million at the end of the second quarter. On the second spot was Waratah Capital Advisors which amassed $23.6 million worth of shares. Moreover, Water Street Capital, GLG Partners, and Two Sigma Advisors were also bullish on Lamar Advertising Co (NASDAQ:LAMR), allocating a large percentage of their portfolios to this stock.
Now, some big names have been driving this bullishness. Navellier & Associates, managed by Louis Navellier, created the most outsized position in Lamar Advertising Co (NASDAQ:LAMR). Navellier & Associates had $1.3 million invested in the company at the end of the quarter. Christopher C. Grisanti's Grisanti Brown & Partners also initiated a $1.2 million position during the quarter. The other funds with brand new LAMR positions are Benjamin A. Smith's Laurion Capital Management, George Zweig, Shane Haas and Ravi Chander's Signition LP, and Steve Cohen's Point72 Asset Management.
Let's check out hedge fund activity in other stocks similar to Lamar Advertising Co (NASDAQ:LAMR). These stocks are Catalent Inc (NYSE:CTLT), Bio-Techne Corporation (NASDAQ:TECH), RPM International Inc. (NYSE:RPM), and Hyatt Hotels Corporation (NYSE:H). All of these stocks' market caps resemble LAMR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTLT,20,427262,5 TECH,24,352676,6 RPM,25,454818,4 H,23,846946,-1 Average,23,520426,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $243 million in LAMR's case. RPM International Inc. (NYSE:RPM) is the most popular stock in this table. On the other hand Catalent Inc (NYSE:CTLT) is the least popular one with only 20 bullish hedge fund positions. Lamar Advertising Co (NASDAQ:LAMR) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on LAMR, though not to the same extent, as the stock returned 2.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.