We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Lannett Company, Inc. (NYSE:LCI) based on that data.
Is Lannett Company, Inc. (NYSE:LCI) the right investment to pursue these days? The best stock pickers are becoming less confident. The number of bullish hedge fund positions dropped by 3 lately. Our calculations also showed that LCI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). LCI was in 8 hedge funds' portfolios at the end of March. There were 11 hedge funds in our database with LCI holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most investors, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, We look at the leaders of this club, approximately 850 funds. It is estimated that this group of investors watch over bulk of all hedge funds' total capital, and by shadowing their inimitable stock picks, Insider Monkey has formulated a few investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_256989" align="aligncenter" width="392"] Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to check out the recent hedge fund action regarding Lannett Company, Inc. (NYSE:LCI).
What does smart money think about Lannett Company, Inc. (NYSE:LCI)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in LCI a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lannett Company, Inc. (NYSE:LCI) was held by D E Shaw, which reported holding $18.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $7.6 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to Lannett Company, Inc. (NYSE:LCI), around 0.63% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to LCI.
Since Lannett Company, Inc. (NYSE:LCI) has witnessed a decline in interest from the smart money, it's easy to see that there is a sect of funds that slashed their full holdings heading into Q4. Interestingly, Israel Englander's Millennium Management said goodbye to the biggest position of the 750 funds watched by Insider Monkey, totaling about $0.3 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund said goodbye to about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Lannett Company, Inc. (NYSE:LCI). We will take a look at Fulcrum Therapeutics, Inc. (NASDAQ:FULC), Trillium Therapeutics Inc. (NASDAQ:TRIL), dMY Technology Group, Inc. (NYSE:DMYT), and One Liberty Properties, Inc. (NYSE:OLP). This group of stocks' market caps match LCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FULC,6,36215,-2 TRIL,25,122213,22 DMYT,21,101818,21 OLP,6,17617,1 Average,14.5,69466,10.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $31 million in LCI's case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Fulcrum Therapeutics, Inc. (NASDAQ:FULC) is the least popular one with only 6 bullish hedge fund positions. Lannett Company, Inc. (NYSE:LCI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately LCI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LCI investors were disappointed as the stock returned 4.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.