It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA).
Is Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) going to take off soon? Hedge funds are becoming more confident. The number of long hedge fund positions inched up by 7 in recent months. Our calculations also showed that LOMA isn't among the 30 most popular stocks among hedge funds (see the video below). LOMA was in 14 hedge funds' portfolios at the end of June. There were 7 hedge funds in our database with LOMA positions at the end of the previous quarter. Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the fresh hedge fund action regarding Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA).
Hedge fund activity in Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA)
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LOMA over the last 16 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) was held by EMS Capital, which reported holding $4.3 million worth of stock at the end of March. It was followed by Highland Capital Management with a $3.8 million position. Other investors bullish on the company included Serengeti Asset Management, Renaissance Technologies, and Oaktree Capital Management.
As aggregate interest increased, key hedge funds have been driving this bullishness. Serengeti Asset Management, managed by Jody LaNasa, created the biggest position in Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA). Serengeti Asset Management had $2.3 million invested in the company at the end of the quarter. Howard Marks's Oaktree Capital Management also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Jos Shaver's Electron Capital Partners, Minhua Zhang's Weld Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) but similarly valued. We will take a look at Heron Therapeutics Inc (NASDAQ:HRTX), BMC Stock Holdings, Inc. (NASDAQ:BMCH), Callon Petroleum Company (NYSE:CPE), and Blucora Inc (NASDAQ:BCOR). All of these stocks' market caps are similar to LOMA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HRTX,18,400466,-13 BMCH,25,243038,-4 CPE,12,166161,-11 BCOR,16,127514,4 Average,17.75,234295,-6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $17 million in LOMA's case. BMC Stock Holdings, Inc. (NASDAQ:BMCH) is the most popular stock in this table. On the other hand Callon Petroleum Company (NYSE:CPE) is the least popular one with only 12 bullish hedge fund positions. Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LOMA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LOMA investors were disappointed as the stock returned -50.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.