Do Hedge Funds Love Lannett Company, Inc. (LCI)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Lannett Company, Inc. (NYSE:LCI) has seen an increase in support from the world’s most elite money managers recently. LCI was in 24 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with LCI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Invesco Mortgage Capital Inc (NYSE:IVR), Applied Industrial Technologies (NYSE:AIT), and Core-Mark Holding Company, Inc. (NASDAQ:CORE) to gather more data points.

Keeping this in mind, let’s take a glance at the recent action encompassing Lannett Company, Inc. (NYSE:LCI).

How have hedgies been trading Lannett Company, Inc. (NYSE:LCI)?

Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Joel Greenblatt’s Gotham Asset Management has the biggest position in Lannett Company, Inc. (NYSE:LCI), worth close to $58 million, corresponding to 0.6% of its total 13F portfolio. The second largest stake is held by Glenn Russell Dubin of Highbridge Capital Management, with a $17.1 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Chuck Royce’s Royce & Associates, Paul Marshall and Ian Wace’s Marshall Wace LLP and Matthew Hulsizer’s PEAK6 Capital Management.

Now, key hedge funds have jumped into Lannett Company, Inc. (NYSE:LCI) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Lannett Company, Inc. (NYSE:LCI). Marshall Wace LLP had $5.6 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also initiated a $3.2 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Mike Vranos’s Ellington, and Andy Redleaf’s Whitebox Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lannett Company, Inc. (NYSE:LCI) but similarly valued. These stocks are Invesco Mortgage Capital Inc (NYSE:IVR), Applied Industrial Technologies (NYSE:AIT), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and Sabra Health Care REIT Inc (NASDAQ:SBRA). This group of stocks’ market caps match LCI’s market cap.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $132 million in LCI’s case. Invesco Mortgage Capital Inc (NYSE:IVR) is the most popular stock in this table. On the other hand Sabra Health Care REIT Inc (NASDAQ:SBRA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Lannett Company, Inc. (NYSE:LCI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.