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Hedge Funds Keep Betting On L Brands Inc (LB)

·6 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on L Brands Inc (NYSE:LB).

Is L Brands Inc (NYSE:LB) ready to rally soon? Investors who are in the know were becoming more confident. The number of long hedge fund positions moved up by 7 lately. L Brands Inc (NYSE:LB) was in 59 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 52. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Daniel Sundheim D1 Capital
Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 recent hedge fund action regarding L Brands Inc (NYSE:LB).

Do Hedge Funds Think LB Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LB over the last 23 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lone Pine Capital, holds the biggest position in L Brands Inc (NYSE:LB). Lone Pine Capital has a $1.6248 billion position in the stock, comprising 5.9% of its 13F portfolio. The second largest stake is held by John Armitage of Egerton Capital Limited, with a $979 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish consist of Gabriel Plotkin's Melvin Capital Management, Robert Pitts's Steadfast Capital Management and Philippe Laffont's Coatue Management. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to L Brands Inc (NYSE:LB), around 32.59% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, earmarking 17.63 percent of its 13F equity portfolio to LB.

Now, key money managers have jumped into L Brands Inc (NYSE:LB) headfirst. Pelham Capital, managed by Ross Turner, created the most outsized position in L Brands Inc (NYSE:LB). Pelham Capital had $187.4 million invested in the company at the end of the quarter. Daniel Sundheim's D1 Capital Partners also made a $181.1 million investment in the stock during the quarter. The following funds were also among the new LB investors: Munir Javeri's 3G Sahana Capital Management, Lee Ainslie's Maverick Capital, and Robert Boucai's Newbrook Capital Advisors.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as L Brands Inc (NYSE:LB) but similarly valued. We will take a look at Insulet Corporation (NASDAQ:PODD), Tyler Technologies, Inc. (NYSE:TYL), TransUnion (NYSE:TRU), Wheaton Precious Metals Corp. (NYSE:WPM), ON Semiconductor Corporation (NASDAQ:ON), Quest Diagnostics Incorporated (NYSE:DGX), and Bio-Rad Laboratories, Inc. (NYSE:BIO). This group of stocks' market caps are similar to LB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PODD,39,1556378,-2 TYL,28,522802,-4 TRU,41,2289853,0 WPM,28,439920,-6 ON,41,1279457,-4 DGX,34,485336,-11 BIO,44,890995,2 Average,36.4,1066392,-3.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1066 million. That figure was $5930 million in LB's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Tyler Technologies, Inc. (NYSE:TYL) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks L Brands Inc (NYSE:LB) is more popular among hedge funds. Our overall hedge fund sentiment score for LB is 90. 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 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on LB as the stock returned 8.6% since the end of March (through 6/11) 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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