The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Lennox International Inc. (NYSE:LII) and determine whether the smart money was really smart about this stock.
Lennox International Inc. (NYSE:LII) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistics is 32. LII investors should pay attention to an increase in support from the world's most elite money managers in recent months. There were 21 hedge funds in our database with LII holdings at the end of March. Our calculations also showed that LII isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let's check out the key hedge fund action surrounding Lennox International Inc. (NYSE:LII).
How are hedge funds trading Lennox International Inc. (NYSE:LII)?
At second quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in LII a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in Lennox International Inc. (NYSE:LII), which was worth $71.9 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $50.9 million worth of shares. Interval Partners, Citadel Investment Group, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Lennox International Inc. (NYSE:LII), around 3.43% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, setting aside 3.28 percent of its 13F equity portfolio to LII.
Now, some big names were leading the bulls' herd. Interval Partners, managed by Gregg Moskowitz, initiated the biggest position in Lennox International Inc. (NYSE:LII). Interval Partners had $32.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $12.7 million investment in the stock during the quarter. The other funds with brand new LII positions are Peter Muller's PDT Partners, Louis Bacon's Moore Global Investments, and Robert Vincent McHugh's Jade Capital Advisors.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Lennox International Inc. (NYSE:LII) but similarly valued. These stocks are Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR), The Western Union Company (NYSE:WU), Camden Property Trust (NYSE:CPT), ICON Public Limited Company (NASDAQ:ICLR), Fortune Brands Home & Security Inc (NYSE:FBHS), NIO Limited (NYSE:NIO), and Dr. Reddy's Laboratories Limited (NYSE:RDY). This group of stocks' market values are similar to LII's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBR,8,10334,3 WU,34,622814,0 CPT,26,336306,-6 ICLR,24,590357,3 FBHS,34,395135,3 NIO,30,567819,14 RDY,12,173335,1 Average,24,385157,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $258 million in LII's case. The Western Union Company (NYSE:WU) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR) is the least popular one with only 8 bullish hedge fund positions. Lennox International Inc. (NYSE:LII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LII is 61.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on LII as the stock returned 13.3% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.