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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded LendingClub Corp (NYSE:LC) based on those filings.
LendingClub Corp (NYSE:LC) was in 19 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. LC shareholders have witnessed an increase in hedge fund interest lately. There were 18 hedge funds in our database with LC holdings at the end of December. Our calculations also showed that LC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 we're going to analyze the recent hedge fund action regarding LendingClub Corp (NYSE:LC).
Do Hedge Funds Think LC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in LC a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in LendingClub Corp (NYSE:LC) was held by ARK Investment Management, which reported holding $120.1 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $20.4 million position. Other investors bullish on the company included No Street Capital, Parian Global Management, and D E Shaw. In terms of the portfolio weights assigned to each position Parian Global Management allocated the biggest weight to LendingClub Corp (NYSE:LC), around 7.96% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, designating 2.56 percent of its 13F equity portfolio to LC.
As industrywide interest jumped, some big names have jumped into LendingClub Corp (NYSE:LC) headfirst. Parian Global Management, managed by Zachary Miller, created the most valuable position in LendingClub Corp (NYSE:LC). Parian Global Management had $17.4 million invested in the company at the end of the quarter. Matthew Lindenbaum's Basswood Capital also initiated a $10.6 million position during the quarter. The following funds were also among the new LC investors: Jeff Osher's No Street Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Israel Englander's Millennium Management.
Let's also examine hedge fund activity in other stocks similar to LendingClub Corp (NYSE:LC). We will take a look at Enterprise Financial Services Corp (NASDAQ:EFSC), Forterra, Inc. (NASDAQ:FRTA), Cardiovascular Systems Inc (NASDAQ:CSII), Schweitzer-Mauduit International, Inc. (NYSE:SWM), Controladora Vuela Co Avcn SA CV (NYSE:VLRS), Griffon Corporation (NYSE:GFF), and B. Riley Financial, Inc. (NASDAQ:RILY). This group of stocks' market caps resemble LC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EFSC,14,42855,0 FRTA,14,201756,-6 CSII,16,125979,-2 SWM,7,11043,-1 VLRS,14,172924,-5 GFF,13,197929,-5 RILY,25,189137,9 Average,14.7,134518,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $265 million in LC's case. B. Riley Financial, Inc. (NASDAQ:RILY) is the most popular stock in this table. On the other hand Schweitzer-Mauduit International, Inc. (NYSE:SWM) is the least popular one with only 7 bullish hedge fund positions. LendingClub Corp (NYSE:LC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LC is 63.1. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately LC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LC were disappointed as the stock returned -5.3% since the end of March (through 7/16) 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.