At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The LGL Group, Inc. (NYSE:LGL).
Is The LGL Group, Inc. (NYSE:LGL) a buy, sell, or hold? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets moved up by 1 lately. Our calculations also showed that LGL 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). LGL was in 5 hedge funds' portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with LGL positions at the end of the previous quarter. 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.
[caption id="attachment_375529" align="aligncenter" width="400"] Mario Gabelli of GAMCO Investors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a gander at the fresh hedge fund action regarding The LGL Group, Inc. (NYSE:LGL).
How have hedgies been trading The LGL Group, Inc. (NYSE:LGL)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in LGL a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in The LGL Group, Inc. (NYSE:LGL), which was worth $4.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $2.5 million worth of shares. Minerva Advisors, Bailard Inc, and Springbok Capital 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 Minerva Advisors allocated the biggest weight to The LGL Group, Inc. (NYSE:LGL), around 0.12% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to LGL.
Now, key money managers have jumped into The LGL Group, Inc. (NYSE:LGL) headfirst. Bailard Inc, managed by Thomas Bailard, initiated the most outsized position in The LGL Group, Inc. (NYSE:LGL). Bailard Inc had $0.1 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks similar to The LGL Group, Inc. (NYSE:LGL). We will take a look at Urban One, Inc. (NASDAQ:UONEK), Western Copper and Gold Corporation (NYSE:WRN), Aclaris Therapeutics, Inc. (NASDAQ:ACRS), and Atlantic American Corporation (NASDAQ:AAME). This group of stocks' market valuations match LGL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UONEK,3,5273,-1 WRN,2,97,-1 ACRS,15,22516,-2 AAME,1,114,0 Average,5.25,7000,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $8 million in LGL's case. Aclaris Therapeutics, Inc. (NASDAQ:ACRS) is the most popular stock in this table. On the other hand Atlantic American Corporation (NASDAQ:AAME) is the least popular one with only 1 bullish hedge fund positions. The LGL Group, Inc. (NYSE:LGL) 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 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately LGL wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LGL investors were disappointed as the stock returned -3.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.