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Were Hedge Funds Right About Warming Up To LCI Industries (LCII)

Abigail Fisher

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

LCI Industries (NYSE:LCII) investors should be aware of an increase in support from the world's most elite money managers lately. LCII was in 10 hedge funds' portfolios at the end of June. There were 8 hedge funds in our database with LCII positions at the end of the previous quarter. Our calculations also showed that LCII 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.

5 Most Popular Stocks Among Hedge Funds

To most traders, hedge funds are assumed to be slow, outdated financial tools of the past. While there are over 8000 funds trading today, Our experts look at the upper echelon of this group, about 750 funds. It is estimated that this group of investors shepherd the majority of all hedge funds' total capital, and by tailing their first-class picks, Insider Monkey has determined various investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

LCII_oct2019

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 key hedge fund action regarding LCI Industries (NYSE:LCII).

What have hedge funds been doing with LCI Industries (NYSE:LCII)?

At Q2's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the first quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in LCII a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Dmitry Balyasny

More specifically, Royce & Associates was the largest shareholder of LCI Industries (NYSE:LCII), with a stake worth $61.3 million reported as of the end of March. Trailing Royce & Associates was Millennium Management, which amassed a stake valued at $8.5 million. Citadel Investment Group, GLG Partners, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in LCI Industries (NYSE:LCII). Balyasny Asset Management had $0.5 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new LCII position is Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as LCI Industries (NYSE:LCII) but similarly valued. These stocks are WD-40 Company (NASDAQ:WDFC), Washington Real Estate Investment Trust (NYSE:WRE), Seaspan Corporation (NYSE:SSW), and Sprouts Farmers Market Inc (NASDAQ:SFM). This group of stocks' market values match LCII's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDFC,15,127686,1 WRE,6,102375,-3 SSW,7,780442,-2 SFM,22,259090,1 Average,12.5,317398,-0.75 [/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 $317 million. That figure was $77 million in LCII's case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 6 bullish hedge fund positions. LCI Industries (NYSE:LCII) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on LCII, though not to the same extent, as the stock returned 2.9% during the third quarter and outperformed the market.

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

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