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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Lannett Company, Inc. (NYSE:LCI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is LCI a good stock to buy now? Lannett Company, Inc. (NYSE:LCI) has seen an increase in hedge fund interest lately. Lannett Company, Inc. (NYSE:LCI) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 24. There were 9 hedge funds in our database with LCI positions at the end of the second quarter. Our calculations also showed that LCI 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.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
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 take a look at the key hedge fund action encompassing Lannett Company, Inc. (NYSE:LCI).
Do Hedge Funds Think LCI Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in LCI over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Lannett Company, Inc. (NYSE:LCI), which was worth $11 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.4 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Citadel Investment Group 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 Factorial Partners allocated the biggest weight to Lannett Company, Inc. (NYSE:LCI), around 0.42% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to LCI.
Consequently, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Lannett Company, Inc. (NYSE:LCI). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks similar to Lannett Company, Inc. (NYSE:LCI). We will take a look at Paratek Pharmaceuticals Inc (NASDAQ:PRTK), America First Multifamily Investors, L.P. (NASDAQ:ATAX), Rafael Holdings, Inc. (NYSE:RFL), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), Tecnoglass Inc. (NASDAQ:TGLS), Cross Country Healthcare, Inc. (NASDAQ:CCRN), and The Joint Corp. (NASDAQ:JYNT). This group of stocks' market valuations resemble LCI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRTK,9,19459,-3 ATAX,1,607,-1 RFL,5,27053,0 ACBI,14,35844,0 TGLS,3,6551,-1 CCRN,15,22935,3 JYNT,17,69411,1 Average,9.1,25980,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $26 million in LCI's case. The Joint Corp. (NASDAQ:JYNT) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 1 bullish hedge fund positions. Lannett Company, Inc. (NYSE:LCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LCI is 46.6. 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 LCI as the stock returned 13.7% 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.