Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Lam Research Corporation (NASDAQ:LRCX).
Lam Research Corporation (NASDAQ:LRCX) investors should pay attention to a decrease in hedge fund sentiment of late. Lam Research Corporation (NASDAQ:LRCX) was in 54 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 62. Our calculations also showed that LRCX 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.
Lee Ainslie of Maverick Capital
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Do Hedge Funds Think LRCX Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2020. By comparison, 54 hedge funds held shares or bullish call options in LRCX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Ken Fisher's Fisher Asset Management has the number one position in Lam Research Corporation (NASDAQ:LRCX), worth close to $603.3 million, comprising 0.4% of its total 13F portfolio. Coming in second is GQG Partners, managed by Rajiv Jain, which holds a $581.9 million position; 2.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass Ken Griffin's Citadel Investment Group, Panayotis Takis Sparaggis's Alkeon Capital Management and Lee Ainslie's Maverick Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Lam Research Corporation (NASDAQ:LRCX), around 22.86% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 10.76 percent of its 13F equity portfolio to LRCX.
Due to the fact that Lam Research Corporation (NASDAQ:LRCX) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few fund managers that decided to sell off their entire stakes last quarter. It's worth mentioning that Philippe Laffont's Coatue Management dumped the biggest stake of the "upper crust" of funds followed by Insider Monkey, worth an estimated $449.7 million in stock, and Ryan Caldwell's Chiron Investment Management was right behind this move, as the fund cut about $9.9 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Lam Research Corporation (NASDAQ:LRCX). These stocks are S&P Global Inc. (NYSE:SPGI), Coupang, Inc. (NYSE:CPNG), Cigna Corporation (NYSE:CI), U.S. Bancorp (NYSE:USB), General Motors Company (NYSE:GM), Mondelez International Inc (NASDAQ:MDLZ), and BP plc (NYSE:BP). This group of stocks' market caps are similar to LRCX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPGI,66,6245296,-9 CPNG,40,21669289,40 CI,53,2497828,-4 USB,43,8335231,-17 GM,86,8053011,16 MDLZ,45,2845001,-5 BP,29,1243778,0 Average,51.7,7269919,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.7 hedge funds with bullish positions and the average amount invested in these stocks was $7270 million. That figure was $3165 million in LRCX's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 29 bullish hedge fund positions. Lam Research Corporation (NASDAQ:LRCX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LRCX is 51.1. 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. 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 still beat the market by 3.3 percentage points. Hedge funds were also right about betting on LRCX, though not to the same extent, as the stock returned 7.9% since Q1 (through June 11th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.