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In this article we are going to use hedge fund sentiment as a tool and determine whether Lifeway Foods, Inc. (NASDAQ:LWAY) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Lifeway Foods, Inc. (NASDAQ:LWAY) was in 4 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. LWAY investors should be aware of an increase in hedge fund interest of late. There were 3 hedge funds in our database with LWAY holdings at the end of June. Our calculations also showed that LWAY isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 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. With all of this in mind we're going to take a look at the latest hedge fund action regarding Lifeway Foods, Inc. (NASDAQ:LWAY).
How have hedgies been trading Lifeway Foods, Inc. (NASDAQ:LWAY)?
At third quarter's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LWAY over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the number one position in Lifeway Foods, Inc. (NASDAQ:LWAY). Renaissance Technologies has a $2.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish encompass Kahn Brothers, Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) and . In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Lifeway Foods, Inc. (NASDAQ:LWAY), around 0.01% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.0026 percent of its 13F equity portfolio to LWAY.
As aggregate interest increased, key money managers were leading the bulls' herd. Prelude Capital (previously Springbok Capital), managed by Gavin Saitowitz and Cisco J. del Valle, established the biggest position in Lifeway Foods, Inc. (NASDAQ:LWAY). Prelude Capital (previously Springbok Capital) had $0 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Lifeway Foods, Inc. (NASDAQ:LWAY) but similarly valued. We will take a look at J Alexander's Holdings Inc (NYSE:JAX), OncoSec Medical Incorporated (NASDAQ:ONCS), Blue Ridge Bankshares, Inc. (NYSE:BRBS), Eyenovia, Inc. (NASDAQ:EYEN), NexPoint Real Estate Finance, Inc. (NYSE:NREF), China Customer Relations Centers, Inc. (NASDAQ:CCRC), and electroCore, Inc. (NASDAQ:ECOR). This group of stocks' market values are closest to LWAY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JAX,10,13023,-3 ONCS,5,1783,2 BRBS,2,1137,0 EYEN,6,3096,4 NREF,6,8047,1 CCRC,1,117,0 ECOR,2,311,-2 Average,4.6,3931,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $3 million in LWAY's case. J Alexander's Holdings Inc (NYSE:JAX) is the most popular stock in this table. On the other hand China Customer Relations Centers, Inc. (NASDAQ:CCRC) is the least popular one with only 1 bullish hedge fund positions. Lifeway Foods, Inc. (NASDAQ:LWAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LWAY is 46.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on LWAY as the stock returned 47.1% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.