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LKQ Corporation (LKQ) Fell Out Of Favor With Hedge Funds

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 30th, 2021. What do these smart investors think about LKQ Corporation (NASDAQ:LKQ)?

LKQ Corporation (NASDAQ:LKQ) has experienced a decrease in hedge fund sentiment of late. LKQ Corporation (NASDAQ:LKQ) was in 35 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 52. Our calculations also showed that LKQ isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler's tsop 10 stock picks
Ricky Sandler's tsop 10 stock picks

Ricky Sandler of Eminence Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a gander at the latest hedge fund action encompassing LKQ Corporation (NASDAQ:LKQ).

Do Hedge Funds Think LKQ Is A Good Stock To Buy Now?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LKQ over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is LKQ A Good Stock To Buy?
Is LKQ A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, ValueAct Capital, managed by Mason Morfit, holds the biggest position in LKQ Corporation (NASDAQ:LKQ). ValueAct Capital has a $1.0607 billion position in the stock, comprising 12.7% of its 13F portfolio. On ValueAct Capital's heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $210.6 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions contain Ricky Sandler's Eminence Capital, Michael O'Keefe's 12th Street Asset Management and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to LKQ Corporation (NASDAQ:LKQ), around 12.68% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, earmarking 8.82 percent of its 13F equity portfolio to LKQ.

Since LKQ Corporation (NASDAQ:LKQ) has experienced a decline in interest from the smart money, it's easy to see that there lies a certain "tier" of hedgies that decided to sell off their entire stakes by the end of the second quarter. Intriguingly, David Thomas's Atalan Capital sold off the largest investment of all the hedgies followed by Insider Monkey, totaling close to $80.4 million in stock, and Martin D. Sass's MD Sass was right behind this move, as the fund dropped about $27.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as LKQ Corporation (NASDAQ:LKQ) but similarly valued. These stocks are Cognex Corporation (NASDAQ:CGNX), Howmet Aerospace Inc. (NYSE:HWM), Molina Healthcare, Inc. (NYSE:MOH), Agnico Eagle Mines Limited (NYSE:AEM), GDS Holdings Limited (NASDAQ:GDS), Godaddy Inc (NYSE:GDDY), and Citrix Systems, Inc. (NASDAQ:CTXS). This group of stocks' market values are similar to LKQ's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CGNX,35,536677,1 HWM,47,3892856,-4 MOH,34,1618744,3 AEM,29,235678,1 GDS,38,1648522,-2 GDDY,39,2769173,0 CTXS,23,668537,3 Average,35,1624312,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1624 million. That figure was $1709 million in LKQ's case. Howmet Aerospace Inc. (NYSE:HWM) is the most popular stock in this table. On the other hand Citrix Systems, Inc. (NASDAQ:CTXS) is the least popular one with only 23 bullish hedge fund positions. LKQ Corporation (NASDAQ:LKQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LKQ is 49.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on LKQ as the stock returned 6.3% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.