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Hedge Funds Are Buying Lydall, Inc. (LDL)

Abigail Fisher

In this article you are going to find out whether hedge funds think Lydall, Inc. (NYSE:LDL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Lydall, Inc. (NYSE:LDL) ready to rally soon? Prominent investors are getting more bullish. The number of long hedge fund positions improved by 3 recently. Our calculations also showed that LDL 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). Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous signals shareholders can use to appraise stocks. Some of the best signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outperform the S&P 500 by a healthy amount (see the details here).

[caption id="attachment_30621" align="aligncenter" width="399"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to analyze the latest hedge fund action encompassing Lydall, Inc. (NYSE:LDL).

How are hedge funds trading Lydall, Inc. (NYSE:LDL)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in LDL 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.

The largest stake in Lydall, Inc. (NYSE:LDL) was held by Royce & Associates, which reported holding $4.1 million worth of stock at the end of September. It was followed by Juniper Investment Company with a $3.4 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Juniper Investment Company allocated the biggest weight to Lydall, Inc. (NYSE:LDL), around 5.24% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, setting aside 1.81 percent of its 13F equity portfolio to LDL.

As aggregate interest increased, some big names have jumped into Lydall, Inc. (NYSE:LDL) headfirst. Fondren Management, managed by Bradley Louis Radoff, established the most valuable position in Lydall, Inc. (NYSE:LDL). Fondren Management had $0.7 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $0.2 million position during the quarter. The other funds with brand new LDL positions are Israel Englander's Millennium Management and Matthew Hulsizer's PEAK6 Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Lydall, Inc. (NYSE:LDL). We will take a look at La Jolla Pharmaceutical Company (NASDAQ:LJPC), Citizens Holding Company (NASDAQ:CIZN), Earthstone Energy, Inc. (NYSE:ESTE), and Riverview Bancorp, Inc. (NASDAQ:RVSB). This group of stocks' market valuations are closest to LDL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LJPC,5,34781,-1 CIZN,2,939,0 ESTE,3,2527,-2 RVSB,11,5742,1 Average,5.25,10997,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $13 million in LDL's case. Riverview Bancorp, Inc. (NASDAQ:RVSB) is the most popular stock in this table. On the other hand Citizens Holding Company (NASDAQ:CIZN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Lydall, Inc. (NYSE:LDL) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on LDL as the stock returned 82.2% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.

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