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Hedge Funds Have Never Been This Bullish On Lincoln Electric Holdings, Inc. (LECO)

Nina Todic

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

Lincoln Electric Holdings, Inc. (NASDAQ:LECO) was in 26 hedge funds' portfolios at the end of the first quarter of 2019. LECO shareholders have witnessed an increase in support from the world's most elite money managers lately. There were 19 hedge funds in our database with LECO holdings at the end of the previous quarter. Our calculations also showed that leco 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' 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 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 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.

Chuck Royce

We're going to go over the key hedge fund action regarding Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

How are hedge funds trading Lincoln Electric Holdings, Inc. (NASDAQ:LECO)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 37% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LECO over the last 15 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with LECO Positions

More specifically, Royce & Associates was the largest shareholder of Lincoln Electric Holdings, Inc. (NASDAQ:LECO), with a stake worth $98.3 million reported as of the end of March. Trailing Royce & Associates was Fisher Asset Management, which amassed a stake valued at $84.6 million. Two Sigma Advisors, Adage Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, some big names have jumped into Lincoln Electric Holdings, Inc. (NASDAQ:LECO) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Lincoln Electric Holdings, Inc. (NASDAQ:LECO). Adage Capital Management had $18.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $4.2 million investment in the stock during the quarter. The other funds with brand new LECO positions are Ken Griffin's Citadel Investment Group, Ken Griffin's Citadel Investment Group, and Dmitry Balyasny's Balyasny Asset Management.

Let's go over hedge fund activity in other stocks similar to Lincoln Electric Holdings, Inc. (NASDAQ:LECO). We will take a look at EQT Corporation (NYSE:EQT), Toll Brothers Inc (NYSE:TOL), Bilibili Inc. (NASDAQ:BILI), and Oshkosh Corporation (NYSE:OSK). This group of stocks' market caps are similar to LECO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EQT,36,1181332,-8 TOL,28,389774,0 BILI,22,448742,2 OSK,24,353710,-5 Average,27.5,593390,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $593 million. That figure was $309 million in LECO's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Bilibili Inc. (NASDAQ:BILI) is the least popular one with only 22 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. This is a slightly negative signal and 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 LECO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LECO investors were disappointed as the stock returned -7.5% during the same time 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.

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