Do Hedge Funds Love Lear Corporation (LEA)?

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 Lear Corporation (NYSE:LEA) to find out whether there were any major changes in hedge funds’ views.

Lear Corporation (NYSE:LEA) has experienced a decrease in activity from the world’s largest hedge funds of late. Lear Corporation (NYSE:LEA) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. Our calculations also showed that LEA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the latest hedge fund action encompassing Lear Corporation (NYSE:LEA).

Do Hedge Funds Think LEA Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LEA over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Lear Corporation (NYSE:LEA). Pzena Investment Management has a $811.6 million position in the stock, comprising 3.2% of its 13F portfolio. Coming in second is Paradice Investment Management, led by David Paradice, holding a $93.8 million position; 4.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Jack Woodruff’s Candlestick Capital Management, Alexander Roepers’s Atlantic Investment Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Lear Corporation (NYSE:LEA), around 10.36% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, designating 4.25 percent of its 13F equity portfolio to LEA.

Due to the fact that Lear Corporation (NYSE:LEA) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers who sold off their full holdings last quarter. At the top of the heap, Louis Bacon’s Moore Global Investments cut the largest stake of the 750 funds watched by Insider Monkey, totaling close to $17.3 million in call options. Mike Vranos’s fund, Ellington, also cut its call options, about $2.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Lear Corporation (NYSE:LEA). These stocks are Banco de Chile (NYSE:BCH), ICL Group Ltd. (NYSE:ICL), Erie Indemnity Company (NASDAQ:ERIE), Ares Capital Corporation (NASDAQ:ARCC), TELUS International (Cda) Inc. (NYSE:TIXT), Assurant, Inc. (NYSE:AIZ), and Churchill Downs Incorporated (NASDAQ:CHDN). This group of stocks’ market valuations match LEA’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $1191 million in LEA’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Lear Corporation (NYSE:LEA) is more popular among hedge funds. Our overall hedge fund sentiment score for LEA is 74.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on LEA as the stock returned 7.2% since the end of September (through 11/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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