At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not LKQ Corporation (NASDAQ:LKQ) makes for a good investment right now.
LKQ Corporation (NASDAQ:LKQ) was in 45 hedge funds' portfolios at the end of June. LKQ shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 43 hedge funds in our database with LKQ positions at the end of the previous quarter. Our calculations also showed that LKQ isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the latest hedge fund action surrounding LKQ Corporation (NASDAQ:LKQ).
What have hedge funds been doing with LKQ Corporation (NASDAQ:LKQ)?
Heading into the third quarter of 2019, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in LKQ a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Southpoint Capital Advisors held the most valuable stake in LKQ Corporation (NASDAQ:LKQ), which was worth $133.1 million at the end of the second quarter. On the second spot was Hound Partners which amassed $98.2 million worth of shares. Moreover, International Value Advisers, D E Shaw, and Millennium Management were also bullish on LKQ Corporation (NASDAQ:LKQ), allocating a large percentage of their portfolios to this stock.
Now, specific money managers have jumped into LKQ Corporation (NASDAQ:LKQ) headfirst. International Value Advisers, managed by Charles de Vaulx, assembled the most valuable position in LKQ Corporation (NASDAQ:LKQ). International Value Advisers had $81.1 million invested in the company at the end of the quarter. Roberto Mignone's Bridger Management also initiated a $23.8 million position during the quarter. The following funds were also among the new LKQ investors: Ted White and Christopher Kiper's Legion Partners Asset Management, Paul Marshall and Ian Wace's Marshall Wace LLP, and Renaissance Technologies.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as LKQ Corporation (NASDAQ:LKQ) but similarly valued. These stocks are Guidewire Software Inc (NYSE:GWRE), ICON Public Limited Company (NASDAQ:ICLR), Woori Financial Group Inc. (NYSE:WF), and Coupa Software Incorporated (NASDAQ:COUP). This group of stocks' market valuations are similar to LKQ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GWRE,22,691982,-4 ICLR,19,828062,-8 WF,1,1327,0 COUP,57,2232647,16 Average,24.75,938505,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $939 million. That figure was $956 million in LKQ's case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 1 bullish hedge fund positions. LKQ Corporation (NASDAQ:LKQ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LKQ as the stock returned 18.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.