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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Lincoln National Corporation (NYSE:LNC).
Is LNC stock a buy? Money managers were in a bullish mood. The number of bullish hedge fund positions moved up by 6 lately. Lincoln National Corporation (NYSE:LNC) was in 36 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 40. Our calculations also showed that LNC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. Keeping this in mind we're going to take a look at the latest hedge fund action regarding Lincoln National Corporation (NYSE:LNC).
Do Hedge Funds Think LNC Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LNC over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, holds the largest position in Lincoln National Corporation (NYSE:LNC). Lyrical Asset Management has a $240.9 million position in the stock, comprising 3.3% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $123.8 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism include Steven Richman's East Side Capital (RR Partners), Louis Bacon's Moore Global Investments and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Lincoln National Corporation (NYSE:LNC), around 7.46% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 3.32 percent of its 13F equity portfolio to LNC.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, established the most outsized position in Lincoln National Corporation (NYSE:LNC). Moore Global Investments had $44.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $32.2 million position during the quarter. The other funds with brand new LNC positions are Emanuel J. Friedman's EJF Capital, Ian Simm's Impax Asset Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Lincoln National Corporation (NYSE:LNC) but similarly valued. We will take a look at Trex Company, Inc. (NYSE:TREX), Floor & Decor Holdings, Inc. (NYSE:FND), Teck Resources Ltd (NYSE:TECK), BanColombia S.A. (NYSE:CIB), American Airlines Group Inc (NASDAQ:AAL), Amedisys Inc (NASDAQ:AMED), and Vistra Corp. (NYSE:VST). This group of stocks' market values are closest to LNC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TREX,30,314067,4 FND,31,1027190,-11 TECK,31,798049,4 CIB,4,90995,1 AAL,37,329142,0 AMED,20,305873,-11 VST,39,1364892,-6 Average,27.4,604315,-2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $604 million. That figure was $709 million in LNC's case. Vistra Corp. (NYSE:VST) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 4 bullish hedge fund positions. Lincoln National Corporation (NYSE:LNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNC is 82.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on LNC as the stock returned 26% since the end of Q4 (through 4/1) 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.