Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and investors' positions as of the end of the fourth quarter. You can find write-ups 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 and analyze what the smart money thinks of LINE Corporation (NYSE:LN) based on that data.
Is LINE Corporation (NYSE:LN) a buy right now? The smart money is getting less bullish. The number of bullish hedge fund positions dropped by 1 lately. Our calculations also showed that LN isn't among the 30 most popular stocks among hedge funds.
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. 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 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 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.
Let's go over the key hedge fund action regarding LINE Corporation (NYSE:LN).
Hedge fund activity in LINE Corporation (NYSE:LN)
At Q4's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LN over the last 14 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.
The largest stake in LINE Corporation (NYSE:LN) was held by Tremblant Capital, which reported holding $49.7 million worth of stock at the end of September. It was followed by LMR Partners with a $1.6 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and D E Shaw.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Hillhouse Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified LN as a viable investment and initiated a position in the stock.
Let's now take a look at hedge fund activity in other stocks similar to LINE Corporation (NYSE:LN). We will take a look at Snap-on Incorporated (NYSE:SNA), American Financial Group (NYSE:AFG), ANGI Homeservices Inc. (NASDAQ:ANGI), and 58.com Inc (NYSE:WUBA). This group of stocks' market caps are closest to LN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNA,25,471183,1 AFG,29,311642,5 ANGI,22,329599,3 WUBA,23,431617,-1 Average,24.75,386010,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $53 million in LN's case. American Financial Group (NYSE:AFG) is the most popular stock in this table. On the other hand ANGI Homeservices Inc. (NASDAQ:ANGI) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks LINE Corporation (NYSE:LN) is even less popular than ANGI. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately LN wasn't in this group. Hedge funds that bet on LN were disappointed as the stock returned 1% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.