Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 18.7% compared to 12.1%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Lancaster Colony Corporation (NASDAQ:LANC) was in 24 hedge funds' portfolios at the end of the first quarter of 2019. LANC shareholders have witnessed an increase in hedge fund interest recently. There were 12 hedge funds in our database with LANC holdings at the end of the previous quarter. Our calculations also showed that lanc isn't among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to review the latest hedge fund action surrounding Lancaster Colony Corporation (NASDAQ:LANC).
How are hedge funds trading Lancaster Colony Corporation (NASDAQ:LANC)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LANC over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Lancaster Colony Corporation (NASDAQ:LANC), with a stake worth $113.6 million reported as of the end of March. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $72.9 million. AQR Capital Management, Citadel Investment Group, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in Lancaster Colony Corporation (NASDAQ:LANC). Millennium Management had $9.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $4 million investment in the stock during the quarter. The other funds with brand new LANC positions are Matthew Tewksbury's Stevens Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Lancaster Colony Corporation (NASDAQ:LANC) but similarly valued. These stocks are Kinross Gold Corporation (NYSE:KGC), Lumentum Holdings Inc (NASDAQ:LITE), PS Business Parks Inc (NYSE:PSB), and Smartsheet Inc. (NYSE:SMAR). This group of stocks' market values are closest to LANC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KGC,19,318872,2 LITE,31,534593,0 PSB,12,53680,0 SMAR,30,568636,13 Average,23,368945,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $285 million in LANC's case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 12 bullish hedge fund positions. Lancaster Colony Corporation (NASDAQ:LANC) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately LANC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LANC were disappointed as the stock returned -8.2% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.