Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Leggett & Platt, Inc. (NYSE:LEG) changed recently.
Is Leggett & Platt, Inc. (NYSE:LEG) a splendid investment right now? Investors who are in the know are in an optimistic mood. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that LEG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are assumed to be slow, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers look at the leaders of this club, approximately 750 funds. Most estimates calculate that this group of people control the majority of all hedge funds' total capital, and by keeping an eye on their matchless stock picks, Insider Monkey has uncovered a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_258236" align="alignnone" width="600"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action encompassing Leggett & Platt, Inc. (NYSE:LEG).
Hedge fund activity in Leggett & Platt, Inc. (NYSE:LEG)
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LEG over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Leggett & Platt, Inc. (NYSE:LEG), which was worth $29.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $13.5 million worth of shares. Holocene Advisors, Laurion Capital Management, and Neo Ivy 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 Neo Ivy Capital allocated the biggest weight to Leggett & Platt, Inc. (NYSE:LEG), around 0.84% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to LEG.
As industrywide interest jumped, key hedge funds have jumped into Leggett & Platt, Inc. (NYSE:LEG) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, initiated the largest position in Leggett & Platt, Inc. (NYSE:LEG). Laurion Capital Management had $2.8 million invested in the company at the end of the quarter. Renee Yao's Neo Ivy Capital also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new LEG investors: Matthew Hulsizer's PEAK6 Capital Management, Ray Dalio's Bridgewater Associates, and Noam Gottesman's GLG Partners.
Let's now take a look at hedge fund activity in other stocks similar to Leggett & Platt, Inc. (NYSE:LEG). These stocks are ITT Corp (NYSE:ITT), Pegasystems Inc. (NASDAQ:PEGA), Polaris Industries Inc. (NYSE:PII), and Acuity Brands, Inc. (NYSE:AYI). This group of stocks' market caps match LEG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITT,20,516984,-5 PEGA,23,733352,-1 PII,25,358943,1 AYI,26,897765,3 Average,23.5,626761,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $627 million. That figure was $53 million in LEG's case. Acuity Brands, Inc. (NYSE:AYI) is the most popular stock in this table. On the other hand ITT Corp (NYSE:ITT) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Leggett & Platt, Inc. (NYSE:LEG) is even less popular than ITT. Hedge funds clearly dropped the ball on LEG as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on LEG as the stock returned 27.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.