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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards LendingClub Corp (NYSE:LC).
Is LC a good stock to buy now? Investors who are in the know were turning bullish. The number of bullish hedge fund bets inched up by 1 recently. LendingClub Corp (NYSE:LC) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that LC 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). There were 12 hedge funds in our database with LC holdings at the end of June.
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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
John Overdeck of Two Sigma Advisors
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. With all of this in mind we're going to view the fresh hedge fund action encompassing LendingClub Corp (NYSE:LC).
Do Hedge Funds Think LC Is A Good Stock To Buy Now?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in LC 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.
More specifically, Renaissance Technologies was the largest shareholder of LendingClub Corp (NYSE:LC), with a stake worth $3.7 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $3.3 million. Arrowstreet Capital, Millennium Management, and D E Shaw 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 PDT Partners allocated the biggest weight to LendingClub Corp (NYSE:LC), around 0.04% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to LC.
Consequently, specific money managers have jumped into LendingClub Corp (NYSE:LC) headfirst. D E Shaw, managed by D. E. Shaw, assembled the largest position in LendingClub Corp (NYSE:LC). D E Shaw had $1.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.1 million investment in the stock during the quarter.
Let's go over hedge fund activity in other stocks similar to LendingClub Corp (NYSE:LC). We will take a look at The Hackett Group, Inc. (NASDAQ:HCKT), Alerus Financial Corporation (NASDAQ:ALRS), Casa Systems, Inc. (NASDAQ:CASA), One Liberty Properties, Inc. (NYSE:OLP), Daily Journal Corporation (NASDAQ:DJCO), Cutera, Inc. (NASDAQ:CUTR), and American Superconductor Corporation (NASDAQ:AMSC). This group of stocks' market values match LC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCKT,15,85266,-2 ALRS,1,598,0 CASA,11,7479,2 OLP,7,22139,-1 DJCO,2,651,0 CUTR,19,79300,4 AMSC,8,47220,-3 Average,9,34665,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $13 million in LC's case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand Alerus Financial Corporation (NASDAQ:ALRS) is the least popular one with only 1 bullish hedge fund positions. LendingClub Corp (NYSE:LC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LC is 55.6. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on LC as the stock returned 98.9% since the end of Q3 (through 12/8) 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.