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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Lumentum Holdings Inc (NASDAQ:LITE).
Is Lumentum Holdings Inc (NASDAQ:LITE) a marvelous investment now? The smart money was cutting their exposure. The number of long hedge fund positions were trimmed by 8 recently. Lumentum Holdings Inc (NASDAQ:LITE) was in 31 hedge funds' portfolios at the end of March. The all time high for this statistic is 42. Our calculations also showed that LITE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 39 hedge funds in our database with LITE positions at the end of the fourth quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's take a gander at the latest hedge fund action surrounding Lumentum Holdings Inc (NASDAQ:LITE).
Do Hedge Funds Think LITE Is A Good Stock To Buy Now?
At Q1's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 34 hedge funds with a bullish position in LITE a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Lumentum Holdings Inc (NASDAQ:LITE) was held by Fisher Asset Management, which reported holding $79.3 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $37.7 million position. Other investors bullish on the company included Pentwater Capital Management, Melqart Asset Management, and Alpine Associates. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Lumentum Holdings Inc (NASDAQ:LITE), around 6.5% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, earmarking 5.82 percent of its 13F equity portfolio to LITE.
Seeing as Lumentum Holdings Inc (NASDAQ:LITE) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few fund managers who sold off their entire stakes in the first quarter. Interestingly, George Yang's Anatole Investment Management cut the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $84.2 million in stock. Michael Johnston's fund, Steelhead Partners, also cut its stock, about $67.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 8 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Lumentum Holdings Inc (NASDAQ:LITE) but similarly valued. We will take a look at Coty Inc (NYSE:COTY), Denali Therapeutics Inc. (NASDAQ:DNLI), TFI International Inc. (NYSE:TFII), Cullen/Frost Bankers, Inc. (NYSE:CFR), ADT Inc. (NYSE:ADT), Axalta Coating Systems Ltd (NYSE:AXTA), and Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). This group of stocks' market caps match LITE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COTY,25,262735,3 DNLI,26,250609,6 TFII,19,164356,9 CFR,11,18887,-6 ADT,16,283810,-8 AXTA,43,1563342,-3 ARWR,20,151598,-4 Average,22.9,385048,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $330 million in LITE's case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Cullen/Frost Bankers, Inc. (NYSE:CFR) is the least popular one with only 11 bullish hedge fund positions. Lumentum Holdings Inc (NASDAQ:LITE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LITE is 50.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately LITE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LITE were disappointed as the stock returned -8.6% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.