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In this article we are going to use hedge fund sentiment as a tool and determine whether Louisiana-Pacific Corporation (NYSE:LPX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is LPX a good stock to buy now? The smart money was in an optimistic mood. The number of long hedge fund bets improved by 2 lately. Louisiana-Pacific Corporation (NYSE:LPX) was in 40 hedge funds' portfolios at the end of September. The all time high for this statistic is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LPX 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 38 hedge funds in our database with LPX positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of indicators stock market investors can use to appraise publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the broader indices by a very impressive amount (see the details here).
Lee Ainslie of Maverick Capital
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 15 best blue chip stocks to buy 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. Keeping this in mind let's analyze the fresh hedge fund action regarding Louisiana-Pacific Corporation (NYSE:LPX).
Do Hedge Funds Think LPX Is A Good Stock To Buy Now?
At the end of September, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LPX over the last 21 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Adage Capital Management was the largest shareholder of Louisiana-Pacific Corporation (NYSE:LPX), with a stake worth $84.3 million reported as of the end of September. Trailing Adage Capital Management was Millennium Management, which amassed a stake valued at $68.7 million. Impala Asset Management, Arrowstreet Capital, and Renaissance Technologies 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 Impala Asset Management allocated the biggest weight to Louisiana-Pacific Corporation (NYSE:LPX), around 6.04% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, setting aside 3.8 percent of its 13F equity portfolio to LPX.
Consequently, some big names were breaking ground themselves. Voss Capital, managed by Travis Cocke, created the largest position in Louisiana-Pacific Corporation (NYSE:LPX). Voss Capital had $6.2 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $2.9 million investment in the stock during the quarter. The other funds with brand new LPX positions are Donald Sussman's Paloma Partners, Lee Ainslie's Maverick Capital, and Peter Muller's PDT Partners.
Let's now take a look at hedge fund activity in other stocks similar to Louisiana-Pacific Corporation (NYSE:LPX). These stocks are Power Integrations Inc (NASDAQ:POWI), Companhia Brasileira de Distrib. (NYSE:CBD), New Residential Investment Corp (NYSE:NRZ), EQT Corporation (NYSE:EQT), Granite Real Estate Investment Trust (NYSE:GRP), Saia Inc (NASDAQ:SAIA), and J2 Global Inc (NASDAQ:JCOM). This group of stocks' market caps resemble LPX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POWI,20,109923,3 CBD,7,10539,1 NRZ,21,134416,-1 EQT,39,310693,5 GRP,6,29425,0 SAIA,20,67732,3 JCOM,25,222865,-5 Average,19.7,126513,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $514 million in LPX's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Louisiana-Pacific Corporation (NYSE:LPX) is more popular among hedge funds. Our overall hedge fund sentiment score for LPX is 87. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on LPX as the stock returned 34.2% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.