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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Lightspeed POS Inc. (NYSE:LSPD) to find out whether there were any major changes in hedge funds' views.
Is LSPD a good stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund bets improved by 11 in recent months. Lightspeed POS Inc. (NYSE:LSPD) was in 11 hedge funds' portfolios at the end of September. Our calculations also showed that LSPD 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
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 let's review the fresh hedge fund action surrounding Lightspeed POS Inc. (NYSE:LSPD).
Do Hedge Funds Think LSPD Is A Good Stock To Buy Now?
At third quarter's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11 from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LSPD over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Lightspeed POS Inc. (NYSE:LSPD), with a stake worth $61.6 million reported as of the end of September. Trailing Adage Capital Management was Echo Street Capital Management, which amassed a stake valued at $50 million. Citadel Investment Group, Millennium Management, and BlueMar Capital Management 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 BlueMar Capital Management allocated the biggest weight to Lightspeed POS Inc. (NYSE:LSPD), around 1.42% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, setting aside 0.86 percent of its 13F equity portfolio to LSPD.
Now, key money managers were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the most outsized position in Lightspeed POS Inc. (NYSE:LSPD). Adage Capital Management had $61.6 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also initiated a $50 million position during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Israel Englander's Millennium Management, and David Rodriguez-Fraile's BlueMar Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Lightspeed POS Inc. (NYSE:LSPD) but similarly valued. These stocks are SL Green Realty Corp (NYSE:SLG), New Relic Inc (NYSE:NEWR), Velodyne Lidar, Inc. (NASDAQ:VLDR), Twist Bioscience Corporation (NASDAQ:TWST), Stantec Inc. (NYSE:STN), Iridium Communications Inc. (NASDAQ:IRDM), and TG Therapeutics Inc (NASDAQ:TGTX). All of these stocks' market caps resemble LSPD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLG,23,208309,-3 NEWR,31,1144221,-4 VLDR,13,121409,-3 TWST,21,408033,2 STN,8,82259,3 IRDM,15,135802,-4 TGTX,30,718643,-4 Average,20.1,402668,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $403 million. That figure was $158 million in LSPD's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 8 bullish hedge fund positions. Lightspeed POS Inc. (NYSE:LSPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LSPD is 20.4. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on LSPD as the stock returned 86.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.