Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Live Oak Bancshares Inc (NASDAQ:LOB).
Live Oak Bancshares Inc (NASDAQ:LOB) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that LOB isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the new hedge fund action surrounding Live Oak Bancshares Inc (NASDAQ:LOB).
How have hedgies been trading Live Oak Bancshares Inc (NASDAQ:LOB)?
At Q2's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LOB over the last 16 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 Live Oak Bancshares Inc (NASDAQ:LOB) was held by Mendon Capital Advisors, which reported holding $21.2 million worth of stock at the end of March. It was followed by Select Equity Group with a $8.6 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Royce & Associates.
Since Live Oak Bancshares Inc (NASDAQ:LOB) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds that elected to cut their full holdings in the second quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $0.8 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $0.4 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Live Oak Bancshares Inc (NASDAQ:LOB). These stocks are Globalstar, Inc. (NYSE:GSAT), Cellectis SA (NASDAQ:CLLS), Model N Inc (NYSE:MODN), and Preferred Apartment Communities Inc. (NYSE:APTS). This group of stocks' market caps are similar to LOB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSAT,13,112559,-2 CLLS,11,31400,3 MODN,12,112063,-4 APTS,7,7218,0 Average,10.75,65810,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $33 million in LOB's case. Globalstar, Inc. (NYSE:GSAT) is the most popular stock in this table. On the other hand Preferred Apartment Communities Inc. (NYSE:APTS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Live Oak Bancshares Inc (NASDAQ:LOB) is even less popular than APTS. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on LOB, though not to the same extent, as the stock returned 5.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.