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The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought LCI Industries (NYSE:LCII) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
LCI Industries (NYSE:LCII) has seen an increase in support from the world's most elite money managers lately. LCI Industries (NYSE:LCII) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LCII 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.
Brad Farber of Atika Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. With all of this in mind let's take a glance at the latest hedge fund action regarding LCI Industries (NYSE:LCII).
Hedge fund activity in LCI Industries (NYSE:LCII)
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the first quarter of 2020. On the other hand, there were a total of 10 hedge funds with a bullish position in LCII a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in LCI Industries (NYSE:LCII) was held by Royce & Associates, which reported holding $76.3 million worth of stock at the end of September. It was followed by Motley Fool Asset Management with a $11.7 million position. Other investors bullish on the company included Intrinsic Edge Capital, Value Holdings LP, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Value Holdings LP allocated the biggest weight to LCI Industries (NYSE:LCII), around 1.55% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 1.17 percent of its 13F equity portfolio to LCII.
Now, specific money managers have been driving this bullishness. Southpoint Capital Advisors, managed by John Smith Clark, established the most outsized position in LCI Industries (NYSE:LCII). Southpoint Capital Advisors had $3.2 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $2.6 million position during the quarter. The other funds with brand new LCII positions are David Harding's Winton Capital Management, Brad Farber's Atika Capital, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to LCI Industries (NYSE:LCII). These stocks are Louisiana-Pacific Corporation (NYSE:LPX), HMS Holdings Corp. (NASDAQ:HMSY), Meritage Homes Corp (NYSE:MTH), CarGurus, Inc. (NASDAQ:CARG), The Howard Hughes Corporation (NYSE:HHC), NuVasive, Inc. (NASDAQ:NUVA), and Shift4 Payments, Inc. (NYSE:FOUR). All of these stocks' market caps resemble LCII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPX,38,417616,12 HMSY,16,110794,-4 MTH,28,345923,6 CARG,31,411397,5 HHC,28,765597,4 NUVA,33,484596,9 FOUR,15,72444,15 Average,27,372624,6.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $126 million in LCII's case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Shift4 Payments, Inc. (NYSE:FOUR) is the least popular one with only 15 bullish hedge fund positions. LCI Industries (NYSE:LCII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LCII is 44.5. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately LCII wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LCII investors were disappointed as the stock returned -7% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.