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In this article we will analyze whether Laird Superfood, Inc. (NYSE:LSF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is LSF a good stock to buy now? Investors who are in the know were cutting their exposure. The number of bullish hedge fund bets fell by 2 lately. Laird Superfood, Inc. (NYSE:LSF) was in 4 hedge funds' portfolios at the end of March. The all time high for this statistic is 12. Our calculations also showed that LSF isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let's take a peek at the recent hedge fund action encompassing Laird Superfood, Inc. (NYSE:LSF).
Do Hedge Funds Think LSF Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in LSF a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, James Morrow's Callodine Capital Management has the number one position in Laird Superfood, Inc. (NYSE:LSF), worth close to $8 million, corresponding to 3.5% of its total 13F portfolio. On Callodine Capital Management's heels is Driehaus Capital, led by Richard Driehaus, holding a $6.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Ian Simm's Impax Asset Management, Matthew Strobeck's Birchview Capital and . In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Laird Superfood, Inc. (NYSE:LSF), around 3.47% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to LSF.
Due to the fact that Laird Superfood, Inc. (NYSE:LSF) has experienced falling interest from the smart money, we can see that there exists a select few hedgies that decided to sell off their entire stakes heading into Q2. At the top of the heap, Benjamin Natter's Kent Lake Capital dumped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising close to $3.5 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also sold off its stock, about $2.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q2.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Laird Superfood, Inc. (NYSE:LSF) but similarly valued. We will take a look at Codiak BioSciences, Inc. (NASDAQ:CDAK), Apyx Medical Corporation (NASDAQ:APYX), Paratek Pharmaceuticals Inc (NASDAQ:PRTK), Ampio Pharmaceuticals, Inc. (NYSE:AMPE), Fiesta Restaurant Group Inc (NASDAQ:FRGI), Fortress Biotech Inc (NASDAQ:FBIO), and Luna Innovations Incorporated (NASDAQ:LUNA). This group of stocks' market caps are similar to LSF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDAK,8,10929,-1 APYX,8,51356,2 PRTK,9,29709,-4 AMPE,9,5236,4 FRGI,12,126443,1 FBIO,6,45814,-1 LUNA,5,32963,-1 Average,8.1,43207,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $18 million in LSF's case. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is the most popular stock in this table. On the other hand Luna Innovations Incorporated (NASDAQ:LUNA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Laird Superfood, Inc. (NYSE:LSF) is even less popular than LUNA. Our overall hedge fund sentiment score for LSF is 13. 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. Hedge funds dodged a bullet by taking a bearish stance towards LSF. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market again by 3.3 percentage points. Unfortunately LSF wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); LSF investors were disappointed as the stock returned -15% since the end of the first quarter (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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.