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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Lowe's Companies, Inc. (NYSE:LOW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Lowe's Companies, Inc. (NYSE:LOW) was in 61 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 89. LOW shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 71 hedge funds in our database with LOW positions at the end of the fourth quarter. Our calculations also showed that LOW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bill Ackman of Pershing Square
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's take a look at the latest hedge fund action surrounding Lowe's Companies, Inc. (NYSE:LOW).
Do Hedge Funds Think LOW Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LOW over the last 23 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Pershing Square, managed by Bill Ackman, holds the biggest position in Lowe's Companies, Inc. (NYSE:LOW). Pershing Square has a $2.2742 billion position in the stock, comprising 21.7% of its 13F portfolio. Coming in second is Eric W. Mandelblatt and Gaurav Kapadia of Soroban Capital Partners, with a $594.3 million position; 5.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Cliff Asness's AQR Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Lowe's Companies, Inc. (NYSE:LOW), around 21.74% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, setting aside 12.19 percent of its 13F equity portfolio to LOW.
Since Lowe's Companies, Inc. (NYSE:LOW) has faced declining sentiment from the smart money, it's easy to see that there is a sect of funds that slashed their entire stakes last quarter. It's worth mentioning that Alexander Mitchell's Scopus Asset Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $92.3 million in stock, and Michael A. Price and Amos Meron's Empyrean Capital Partners was right behind this move, as the fund said goodbye to about $77.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 10 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Lowe's Companies, Inc. (NYSE:LOW) but similarly valued. We will take a look at Charter Communications, Inc. (NASDAQ:CHTR), JD.Com Inc (NASDAQ:JD), Royal Bank of Canada (NYSE:RY), Sony Corporation (NYSE:SNE), AstraZeneca plc (NASDAQ:AZN), Starbucks Corporation (NASDAQ:SBUX), and Caterpillar Inc. (NYSE:CAT). This group of stocks' market caps match LOW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHTR,74,16399220,-16 JD,75,11309916,-14 RY,18,716039,0 SNE,27,541868,-1 AZN,34,2660857,-7 SBUX,61,4442448,-6 CAT,53,4956227,0 Average,48.9,5860939,-6.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.9 hedge funds with bullish positions and the average amount invested in these stocks was $5861 million. That figure was $5172 million in LOW's case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. Lowe's Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LOW is 53.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately LOW wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LOW were disappointed as the stock returned 0.6% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.