The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards La-Z-Boy Incorporated (NYSE:LZB).
La-Z-Boy Incorporated (NYSE:LZB) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of December. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as U.S. Physical Therapy, Inc. (NYSE:USPH), Diamond Offshore Drilling Inc (NYSE:DO), and Portola Pharmaceuticals Inc (NASDAQ:PTLA) to gather more data points.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the fresh hedge fund action surrounding La-Z-Boy Incorporated (NYSE:LZB).
What does the smart money think about La-Z-Boy Incorporated (NYSE:LZB)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in LZB a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of La-Z-Boy Incorporated (NYSE:LZB), with a stake worth $17.3 million reported as of the end of December. Trailing Royce & Associates was GAMCO Investors, which amassed a stake valued at $11.2 million. D E Shaw, Balyasny Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Because La-Z-Boy Incorporated (NYSE:LZB) has experienced falling interest from hedge fund managers, it's easy to see that there exists a select few fund managers who sold off their entire stakes last quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising close to $0.9 million in stock. Joel Greenblatt's fund, Gotham Asset Management, also dumped its stock, about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as La-Z-Boy Incorporated (NYSE:LZB) but similarly valued. These stocks are U.S. Physical Therapy, Inc. (NYSE:USPH), Diamond Offshore Drilling Inc (NYSE:DO), Portola Pharmaceuticals Inc (NASDAQ:PTLA), and HFF, Inc. (NYSE:HF). This group of stocks' market values are similar to LZB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position USPH,11,87506,-1 DO,16,40456,-3 PTLA,14,241561,-9 HF,13,16140,3 Average,13.5,96416,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $60 million in LZB's case. Diamond Offshore Drilling Inc (NYSE:DO) is the most popular stock in this table. On the other hand U.S. Physical Therapy, Inc. (NYSE:USPH) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks La-Z-Boy Incorporated (NYSE:LZB) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on LZB, though not to the same extent, as the stock returned 19.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.