Is Lakeland Bancorp, Inc. (NASDAQ:LBAI) a good stock to buy 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 have 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.
Lakeland Bancorp, Inc. (NASDAQ:LBAI) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that LBAI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely 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. We're going to go over the recent hedge fund action encompassing Lakeland Bancorp, Inc. (NASDAQ:LBAI).
Hedge fund activity in Lakeland Bancorp, Inc. (NASDAQ:LBAI)
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LBAI over the last 16 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Cardinal Capital held the most valuable stake in Lakeland Bancorp, Inc. (NASDAQ:LBAI), which was worth $23.5 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $14.2 million worth of shares. Moreover, Basswood Capital, Millennium Management, and Citadel Investment Group were also bullish on Lakeland Bancorp, Inc. (NASDAQ:LBAI), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified LBAI as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Lakeland Bancorp, Inc. (NASDAQ:LBAI) but similarly valued. We will take a look at Lindblad Expeditions Holdings Inc (NASDAQ:LIND), ACCO Brands Corporation (NYSE:ACCO), NetGear, Inc. (NASDAQ:NTGR), and Caleres Inc (NYSE:CAL). This group of stocks' market valuations match LBAI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LIND,15,190272,-5 ACCO,16,37871,-2 NTGR,11,11253,-5 CAL,8,41917,-2 Average,12.5,70328,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $53 million in LBAI's case. ACCO Brands Corporation (NYSE:ACCO) is the most popular stock in this table. On the other hand Caleres Inc (NYSE:CAL) is the least popular one with only 8 bullish hedge fund positions. Lakeland Bancorp, Inc. (NASDAQ:LBAI) 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 LBAI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LBAI investors were disappointed as the stock returned -3.7% 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.