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Do Hedge Funds Love La-Z-Boy Incorporated (LZB)?

Debasis Saha
·6 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of La-Z-Boy Incorporated (NYSE:LZB) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in La-Z-Boy Incorporated (NYSE:LZB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LZB 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). At the end of this article we will also compare LZB to other stocks including Passage Bio, Inc. (NASDAQ:PASG), PDC Energy Inc (NASDAQ:PDCE), and Office Depot Inc (NYSE:ODP) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are over 8000 funds in operation today, We hone in on the upper echelon of this club, around 850 funds. These hedge fund managers control most of all hedge funds' total capital, and by paying attention to their unrivaled equity investments, Insider Monkey has brought to light a number of investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

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 precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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. Now let's go over the latest hedge fund action encompassing La-Z-Boy Incorporated (NYSE:LZB).

How have hedgies been trading La-Z-Boy Incorporated (NYSE:LZB)?

Heading into the third quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in LZB 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.

Is LZB A Good Stock To Buy?
Is LZB A Good Stock To Buy?

The largest stake in La-Z-Boy Incorporated (NYSE:LZB) was held by GAMCO Investors, which reported holding $9.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $9.5 million position. Other investors bullish on the company included D E Shaw, Royce & Associates, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to La-Z-Boy Incorporated (NYSE:LZB), around 0.32% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to LZB.

Since La-Z-Boy Incorporated (NYSE:LZB) has faced a decline in interest from the smart money, we can see that there exists a select few fund managers who were dropping their entire stakes in the second quarter. At the top of the heap, Brandon Haley's Holocene Advisors dropped the largest stake of the 750 funds tracked by Insider Monkey, totaling about $1.1 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to La-Z-Boy Incorporated (NYSE:LZB). These stocks are Passage Bio, Inc. (NASDAQ:PASG), PDC Energy Inc (NASDAQ:PDCE), Office Depot Inc (NYSE:ODP), Coeur Mining, Inc. (NYSE:CDE), Heartland Financial USA Inc (NASDAQ:HTLF), Alexander's, Inc. (NYSE:ALX), and Intellia Therapeutics, Inc. (NASDAQ:NTLA). All of these stocks' market caps are closest to LZB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PASG,13,474820,-4 PDCE,23,210307,-2 ODP,18,107793,1 CDE,14,48945,0 HTLF,5,6042,-1 ALX,8,96144,0 NTLA,17,63292,7 Average,14,143906,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $51 million in LZB's case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 5 bullish hedge fund positions. La-Z-Boy Incorporated (NYSE:LZB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LZB is 74.6. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on LZB as the stock returned 17.1% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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