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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Lazydays Holdings, Inc. (NASDAQ:LAZY).
Is LAZY a good stock to buy now? Hedge fund interest in Lazydays Holdings, Inc. (NASDAQ:LAZY) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LAZY 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). 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 Eagle Bancorp Montana Inc (NASDAQ:EBMT), Asure Software Inc (NASDAQ:ASUR), and Evans Bancorp Inc. (NYSE:EVBN) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Nick Thakore of Diametric Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a look at the key hedge fund action encompassing Lazydays Holdings, Inc. (NASDAQ:LAZY).
How have hedgies been trading Lazydays Holdings, Inc. (NASDAQ:LAZY)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LAZY over the last 21 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Coliseum Capital was the largest shareholder of Lazydays Holdings, Inc. (NASDAQ:LAZY), with a stake worth $7.7 million reported as of the end of September. Trailing Coliseum Capital was Renaissance Technologies, which amassed a stake valued at $3 million. Royce & Associates, Diametric Capital, and Prelude Capital (previously Springbok Capital) were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Lazydays Holdings, Inc. (NASDAQ:LAZY), around 0.83% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, setting aside 0.26 percent of its 13F equity portfolio to LAZY.
Judging by the fact that Lazydays Holdings, Inc. (NASDAQ:LAZY) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there is a sect of fund managers that decided to sell off their entire stakes by the end of the third quarter. It's worth mentioning that Peter S. Park's Park West Asset Management said goodbye to the largest investment of the 750 funds followed by Insider Monkey, worth close to $6.8 million in stock, and Brett Hendrickson's Nokomis Capital was right behind this move, as the fund said goodbye to about $2.6 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Lazydays Holdings, Inc. (NASDAQ:LAZY) but similarly valued. We will take a look at Eagle Bancorp Montana Inc (NASDAQ:EBMT), Asure Software Inc (NASDAQ:ASUR), Evans Bancorp Inc. (NYSE:EVBN), DHI Group Inc. (NYSE:DHX), Saga Communications, Inc. (NASDAQ:SGA), Aviat Networks Inc (NASDAQ:AVNW), and ObsEva SA (NASDAQ:OBSV). This group of stocks' market caps resemble LAZY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBMT,5,9176,0 ASUR,5,17355,-4 EVBN,4,1376,0 DHX,11,30855,-3 SGA,3,10874,0 AVNW,5,27577,0 OBSV,6,17950,-5 Average,5.6,16452,-1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $12 million in LAZY's case. DHI Group Inc. (NYSE:DHX) is the most popular stock in this table. On the other hand Saga Communications, Inc. (NASDAQ:SGA) is the least popular one with only 3 bullish hedge fund positions. Lazydays Holdings, Inc. (NASDAQ:LAZY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LAZY is 60. 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 gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on LAZY as the stock returned 28.2% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.