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Do Hedge Funds Love Lincoln Electric Holdings, Inc. (LECO)?

·6 min read

In this article we will take a look at whether hedge funds think Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Lincoln Electric Holdings, Inc. (NASDAQ:LECO) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Lincoln Electric Holdings, Inc. (NASDAQ:LECO) was in 19 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that LECO 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.

Mario Gabelli of GAMCO Investors

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. With all of this in mind we're going to take a peek at the fresh hedge fund action encompassing Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

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

At first quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LECO over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is LECO A Good Stock To Buy?
Is LECO A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in Lincoln Electric Holdings, Inc. (NASDAQ:LECO), which was worth $90.1 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $88.8 million worth of shares. Arrowstreet Capital, GAMCO Investors, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Lincoln Electric Holdings, Inc. (NASDAQ:LECO), around 0.6% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to LECO.

Judging by the fact that Lincoln Electric Holdings, Inc. (NASDAQ:LECO) has faced a decline in interest from hedge fund managers, we can see that there were a few fund managers that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Qing Li's Sciencast Management said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at close to $1.2 million in stock. David Harding's fund, Winton Capital Management, also sold off its stock, about $1 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the first quarter.

Let's go over hedge fund activity in other stocks similar to Lincoln Electric Holdings, Inc. (NASDAQ:LECO). We will take a look at Donaldson Company, Inc. (NYSE:DCI), Hill-Rom Holdings, Inc. (NYSE:HRC), Advanced Drainage Systems Inc. (NYSE:WMS), BRP Inc. (NASDAQ:DOOO), Euronet Worldwide, Inc. (NASDAQ:EEFT), Targa Resources Corp (NYSE:TRGP), and Virgin Galactic Holdings, Inc. (NYSE:SPCE). This group of stocks' market caps match LECO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCI,28,279375,2 HRC,30,454507,2 WMS,29,1220549,4 DOOO,17,196834,2 EEFT,40,511517,8 TRGP,24,531977,-5 SPCE,17,210974,-6 Average,26.4,486533,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $487 million. That figure was $283 million in LECO's case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 17 bullish hedge fund positions. Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LECO is 30.3. 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 gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on LECO, though not to the same extent, as the stock returned 9.7% since the end of Q1 (through July 16th) and outperformed the market.

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