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Hedge Funds Are Selling Lumentum Holdings Inc (LITE)

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Lumentum Holdings Inc (NASDAQ:LITE) based on that data.

Lumentum Holdings Inc (NASDAQ:LITE) was in 29 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 42. LITE has experienced a decrease in hedge fund interest in recent months. There were 31 hedge funds in our database with LITE holdings at the end of March. Our calculations also showed that LITE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Ken Fisher FISHER ASSET MANAGEMENT
Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a glance at the latest hedge fund action surrounding Lumentum Holdings Inc (NASDAQ:LITE).

Do Hedge Funds Think LITE Is A Good Stock To Buy Now?

At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the first quarter of 2020. On the other hand, there were a total of 42 hedge funds with a bullish position in LITE a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, ValueAct Capital was the largest shareholder of Lumentum Holdings Inc (NASDAQ:LITE), with a stake worth $79.3 million reported as of the end of June. Trailing ValueAct Capital was Fisher Asset Management, which amassed a stake valued at $69.5 million. Alyeska Investment Group, Citadel Investment Group, and Pentwater Capital Management 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 Divisar Capital allocated the biggest weight to Lumentum Holdings Inc (NASDAQ:LITE), around 6.26% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, dishing out 3.38 percent of its 13F equity portfolio to LITE.

Because Lumentum Holdings Inc (NASDAQ:LITE) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their positions entirely in the second quarter. It's worth mentioning that Michel Massoud's Melqart Asset Management dropped the largest position of all the hedgies tracked by Insider Monkey, comprising about $32.4 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund said goodbye to about $28.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds in the second quarter.

Let's now take a look at hedge fund activity in other stocks similar to Lumentum Holdings Inc (NASDAQ:LITE). These stocks are Huaneng Power International Inc (NYSE:HNP), EQT Corporation (NYSE:EQT), Colfax Corporation (NYSE:CFX), J2 Global Inc (NASDAQ:JCOM), Sarepta Therapeutics Inc (NASDAQ:SRPT), Louisiana-Pacific Corporation (NYSE:LPX), and Vir Biotechnology, Inc. (NASDAQ:VIR). This group of stocks' market caps resemble LITE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HNP,4,4331,0 EQT,43,468450,8 CFX,31,1074229,-18 JCOM,22,414616,0 SRPT,34,539734,1 LPX,39,852143,9 VIR,11,34719,2 Average,26.3,484032,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $335 million in LITE's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 4 bullish hedge fund positions. Lumentum Holdings Inc (NASDAQ:LITE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LITE is 55.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on LITE as the stock returned 3.9% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.