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Were Hedge Funds Right About Flocking Into LivePerson, Inc. (LPSN) ?

Asma UL Husna

Before we spend countless hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of LivePerson, Inc. (NASDAQ:LPSN).

Is LivePerson, Inc. (NASDAQ:LPSN) a bargain? Investors who are in the know are becoming more confident. The number of long hedge fund positions moved up by 5 lately. Our calculations also showed that LPSN isn't among the 30 most popular stocks among hedge funds. LPSN was in 17 hedge funds' portfolios at the end of December. There were 12 hedge funds in our database with LPSN positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

D. E. Shaw

We're going to check out the fresh hedge fund action surrounding LivePerson, Inc. (NASDAQ:LPSN).

How have hedgies been trading LivePerson, Inc. (NASDAQ:LPSN)?

At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 42% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LPSN over the last 14 quarters. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

LPSN_apr2019

The largest stake in LivePerson, Inc. (NASDAQ:LPSN) was held by RGM Capital, which reported holding $58.4 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $24.8 million position. Other investors bullish on the company included Millennium Management, AQR Capital Management, and D E Shaw.

Now, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in LivePerson, Inc. (NASDAQ:LPSN). Citadel Investment Group had $4.9 million invested in the company at the end of the quarter. Josh Goldberg's G2 Investment Partners Management also made a $3.4 million investment in the stock during the quarter. The other funds with new positions in the stock are George McCabe's Portolan Capital Management, Benjamin A. Smith's Laurion Capital Management, and Minhua Zhang's Weld Capital Management.

Let's also examine hedge fund activity in other stocks similar to LivePerson, Inc. (NASDAQ:LPSN). We will take a look at National HealthCare Corporation (NYSE:NHC), Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), Dine Brands Global, Inc. (NYSE:DIN), and Caleres Inc (NYSE:CAL). This group of stocks' market caps are closest to LPSN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NHC,9,51474,-1 LTRPA,20,328843,-3 DIN,20,114816,1 CAL,12,32329,-5 Average,15.25,131866,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $131 million in LPSN's case. Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) is the most popular stock in this table. On the other hand National HealthCare Corporation (NYSE:NHC) is the least popular one with only 9 bullish hedge fund positions. LivePerson, Inc. (NASDAQ:LPSN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on LPSN as the stock returned 51.4% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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