- Oops!Something went wrong.Please try again later.
In this article we will check out the progression of hedge fund sentiment towards Life Storage, Inc. (NYSE:LSI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is LSI a good stock to buy now? Life Storage, Inc. (NYSE:LSI) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 22. LSI investors should be aware of a decrease in hedge fund interest lately. There were 19 hedge funds in our database with LSI holdings at the end of June. Our calculations also showed that LSI 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Stuart Zimmer of Zimmer Partners
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. Keeping this in mind we're going to take a gander at the latest hedge fund action surrounding Life Storage, Inc. (NYSE:LSI).
Do Hedge Funds Think LSI Is A Good Stock To Buy Now?
At the end of September, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in LSI a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Life Storage, Inc. (NYSE:LSI) was held by Millennium Management, which reported holding $41.9 million worth of stock at the end of September. It was followed by Zimmer Partners with a $36.8 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Life Storage, Inc. (NYSE:LSI), around 1.07% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 0.57 percent of its 13F equity portfolio to LSI.
Judging by the fact that Life Storage, Inc. (NYSE:LSI) has witnessed falling interest from hedge fund managers, we can see that there lies a certain "tier" of hedgies that decided to sell off their entire stakes in the third quarter. Interestingly, Greg Poole's Echo Street Capital Management dropped the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $39.2 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Life Storage, Inc. (NYSE:LSI). We will take a look at Lancaster Colony Corporation (NASDAQ:LANC), US Foods Holding Corp. (NYSE:USFD), Helen of Troy Limited (NASDAQ:HELE), Huntsman Corporation (NYSE:HUN), Q2 Holdings Inc (NYSE:QTWO), Fiverr International Ltd. (NYSE:FVRR), and Kimco Realty Corp (NYSE:KIM). This group of stocks' market values are closest to LSI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LANC,24,308621,5 USFD,41,769983,6 HELE,27,210119,14 HUN,24,452412,-1 QTWO,27,270014,1 FVRR,30,563661,9 KIM,22,183861,-6 Average,27.9,394096,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $151 million in LSI's case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Life Storage, Inc. (NYSE:LSI) is even less popular than KIM. Our overall hedge fund sentiment score for LSI is 28.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards LSI. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th but managed to beat the market again by 15.8 percentage points. Unfortunately LSI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LSI investors were disappointed as the stock returned 8.5% since the end of the third quarter (through 12/14) 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 most of these stocks already outperformed the market so far in 2020.
Get real-time email alerts: Follow Life Storage Inc. (NYSE:LSI)
Disclosure: None. This article was originally published at Insider Monkey.