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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Lamar Advertising Company (REIT) (NASDAQ:LAMR)? The smart money sentiment can provide an answer to this question.
Is LAMR a good stock to buy? Lamar Advertising Company (REIT) (NASDAQ:LAMR) has seen a decrease in enthusiasm from smart money recently. Lamar Advertising Company (REIT) (NASDAQ:LAMR) was in 37 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. There were 44 hedge funds in our database with LAMR positions at the end of the second quarter. Our calculations also showed that LAMR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Tannenbaum of Fir Tree
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we're going to go over the latest hedge fund action regarding Lamar Advertising Company (REIT) (NASDAQ:LAMR).
Do Hedge Funds Think LAMR Is A Good Stock To Buy Now?
At Q3's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LAMR over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lamar Advertising Company (REIT) (NASDAQ:LAMR) was held by Select Equity Group, which reported holding $97.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $43.9 million position. Other investors bullish on the company included Fir Tree, D E Shaw, and Jericho Capital Asset Management. In terms of the portfolio weights assigned to each position LFL Advisers allocated the biggest weight to Lamar Advertising Company (REIT) (NASDAQ:LAMR), around 9.98% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, setting aside 3.05 percent of its 13F equity portfolio to LAMR.
Seeing as Lamar Advertising Company (REIT) (NASDAQ:LAMR) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies that elected to cut their entire stakes in the third quarter. Intriguingly, Amish Mehta's SQN Investors sold off the largest investment of the 750 funds tracked by Insider Monkey, worth close to $50 million in stock. James Dinan's fund, York Capital Management, also said goodbye to its stock, about $15.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 7 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Lamar Advertising Company (REIT) (NASDAQ:LAMR) but similarly valued. We will take a look at Dolby Laboratories, Inc. (NYSE:DLB), Novavax, Inc. (NASDAQ:NVAX), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Athene Holding Ltd. (NYSE:ATH), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), CF Industries Holdings, Inc. (NYSE:CF), and Casey's General Stores, Inc. (NASDAQ:CASY). This group of stocks' market valuations match LAMR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLB,35,596301,7 NVAX,36,611401,18 IONS,25,312130,2 ATH,31,853235,-2 ADPT,26,2671964,-2 CF,34,586641,-3 CASY,21,133183,-2 Average,29.7,823551,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $824 million. That figure was $381 million in LAMR's case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Casey's General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Lamar Advertising Company (REIT) (NASDAQ:LAMR) is more popular among hedge funds. Our overall hedge fund sentiment score for LAMR is 73.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on LAMR as the stock returned 26.7% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.