Is LINE Corporation (NYSE:LN) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
LINE Corporation (NYSE:LN) was in 9 hedge funds' portfolios at the end of June. LN has seen an increase in hedge fund interest lately. There were 5 hedge funds in our database with LN holdings at the end of the previous quarter. Our calculations also showed that LN 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.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Let's take a peek at the new hedge fund action encompassing LINE Corporation (NYSE:LN).
What have hedge funds been doing with LINE Corporation (NYSE:LN)?
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 80% from the first quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in LN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tremblant Capital was the largest shareholder of LINE Corporation (NYSE:LN), with a stake worth $35.8 million reported as of the end of March. Trailing Tremblant Capital was Renaissance Technologies, which amassed a stake valued at $4.9 million. Millennium Management, CSat Investment Advisory, and LMR Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Now, specific money managers have jumped into LINE Corporation (NYSE:LN) headfirst. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the most outsized position in LINE Corporation (NYSE:LN). LMR Partners had $1.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.4 million position during the quarter. The other funds with brand new LN positions are Minhua Zhang's Weld Capital Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as LINE Corporation (NYSE:LN) but similarly valued. We will take a look at Flowserve Corporation (NYSE:FLS), GrubHub Inc (NYSE:GRUB), Old Republic International Corporation (NYSE:ORI), and BRF S.A. (NYSE:BRFS). All of these stocks' market caps match LN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLS,26,343957,6 GRUB,32,808367,0 ORI,21,413524,2 BRFS,13,124053,3 Average,23,422475,2.75 [/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 $422 million. That figure was $46 million in LN's case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand BRF S.A. (NYSE:BRFS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks LINE Corporation (NYSE:LN) is even less popular than BRFS. Hedge funds clearly dropped the ball on LN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on LN as the stock returned 27.7% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.