A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Lennox International Inc. (NYSE:LII) during the quarter.
Lennox International Inc. (NYSE:LII) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that lii 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 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the latest hedge fund action regarding Lennox International Inc. (NYSE:LII).
What have hedge funds been doing with Lennox International Inc. (NYSE:LII)?
At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LII over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in Lennox International Inc. (NYSE:LII), which was worth $64.7 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $32.4 million worth of shares. Moreover, Citadel Investment Group, Bishop Rock Capital, and McKinley Capital Management were also bullish on Lennox International Inc. (NYSE:LII), allocating a large percentage of their portfolios to this stock.
Seeing as Lennox International Inc. (NYSE:LII) has faced a decline in interest from the smart money, it's easy to see that there was a specific group of fund managers who sold off their positions entirely heading into Q3. Interestingly, Phill Gross and Robert Atchinson's Adage Capital Management dropped the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $27 million in stock. Bain Capital's fund, Brookside Capital, also dumped its stock, about $10.6 million worth. These moves are interesting, as total hedge fund interest was cut by 5 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Lennox International Inc. (NYSE:LII) but similarly valued. We will take a look at Eastman Chemical Company (NYSE:EMN), The Mosaic Company (NYSE:MOS), Burlington Stores Inc (NYSE:BURL), and Jacobs Engineering Group Inc (NYSE:JEC). This group of stocks' market values are closest to LII's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EMN,30,518981,-3 MOS,29,770708,-8 BURL,31,1351671,1 JEC,33,1008926,0 Average,30.75,912572,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $139 million in LII's case. Jacobs Engineering Group Inc (NYSE:JEC) is the most popular stock in this table. On the other hand The Mosaic Company (NYSE:MOS) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Lennox International Inc. (NYSE:LII) is even less popular than MOS. Hedge funds clearly dropped the ball on LII 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on LII as the stock returned 4.4% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.