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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of LivePerson, Inc. (NASDAQ:LPSN).
LivePerson, Inc. (NASDAQ:LPSN) has experienced a decrease in hedge fund sentiment in recent months. Our calculations also showed that LPSN isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the new hedge fund action regarding LivePerson, Inc. (NASDAQ:LPSN).
What does smart money think about LivePerson, Inc. (NASDAQ:LPSN)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in LPSN over the last 18 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert G. Moses's RGM Capital has the number one position in LivePerson, Inc. (NASDAQ:LPSN), worth close to $46.9 million, accounting for 3.7% of its total 13F portfolio. The second largest stake is held by Portolan Capital Management, led by George McCabe, holding a $18.8 million position; 2.8% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include Jerry Kochanski's Shelter Haven Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to LivePerson, Inc. (NASDAQ:LPSN), around 3.72% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, dishing out 3.68 percent of its 13F equity portfolio to LPSN.
Because LivePerson, Inc. (NASDAQ:LPSN) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few hedgies that slashed their full holdings in the first quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley's Polar Capital cut the biggest investment of the 750 funds watched by Insider Monkey, totaling an estimated $45.3 million in stock. Israel Englander's fund, Millennium Management, also dropped its stock, about $11.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 8 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as LivePerson, Inc. (NASDAQ:LPSN) but similarly valued. We will take a look at M.D.C. Holdings, Inc. (NYSE:MDC), First Merchants Corporation (NASDAQ:FRME), Inter Parfums, Inc. (NASDAQ:IPAR), and Patterson Companies, Inc. (NASDAQ:PDCO). This group of stocks' market values are similar to LPSN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDC,14,61401,-3 FRME,12,64591,0 IPAR,13,46189,-2 PDCO,17,55017,-8 Average,14,56800,-3.25 [/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 $57 million. That figure was $97 million in LPSN's case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand First Merchants Corporation (NASDAQ:FRME) is the least popular one with only 12 bullish hedge fund positions. LivePerson, Inc. (NASDAQ:LPSN) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on LPSN as the stock returned 79.3% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.