Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Lakeland Financial Corporation (NASDAQ:LKFN).
Lakeland Financial Corporation (NASDAQ:LKFN) investors should be aware of a decrease in hedge fund sentiment of late. LKFN was in 11 hedge funds' portfolios at the end of December. There were 12 hedge funds in our database with LKFN holdings at the end of the previous quarter. Our calculations also showed that LKFN isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action surrounding Lakeland Financial Corporation (NASDAQ:LKFN).
What does the smart money think about Lakeland Financial Corporation (NASDAQ:LKFN)?
At Q4's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LKFN over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lakeland Financial Corporation (NASDAQ:LKFN) was held by Renaissance Technologies, which reported holding $8.2 million worth of stock at the end of December. It was followed by Millennium Management with a $5.3 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and PDT Partners.
Since Lakeland Financial Corporation (NASDAQ:LKFN) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Matthew Hulsizer's PEAK6 Capital Management cut the biggest position of the "upper crust" of funds monitored by Insider Monkey, comprising about $0.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also said goodbye to its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Lakeland Financial Corporation (NASDAQ:LKFN) but similarly valued. We will take a look at Denny's Corporation (NASDAQ:DENN), Radware Ltd. (NASDAQ:RDWR), Pacific Drilling SA (NYSE:PACD), and Five Point Holdings, LLC (NYSE:FPH). This group of stocks' market values resemble LKFN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DENN,19,163526,-3 RDWR,18,301130,2 PACD,6,710151,6 FPH,16,242436,4 Average,14.75,354311,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $354 million. That figure was $20 million in LKFN's case. Denny's Corporation (NASDAQ:DENN) is the most popular stock in this table. On the other hand Pacific Drilling SA (NYSE:PACD) is the least popular one with only 6 bullish hedge fund positions. Lakeland Financial Corporation (NASDAQ:LKFN) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately LKFN wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); LKFN investors were disappointed as the stock returned 16.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
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