Do Hedge Funds Love LKQ Corporation (LKQ)?

In this article we are going to use hedge fund sentiment as a tool and determine whether LKQ Corporation (NASDAQ:LKQ) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

LKQ Corporation (NASDAQ:LKQ) has seen an increase in hedge fund sentiment lately. LKQ Corporation (NASDAQ:LKQ) was in 38 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. There were 35 hedge funds in our database with LKQ holdings at the end of June. Our calculations also showed that LKQ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding LKQ Corporation (NASDAQ:LKQ).

Paul Marshall of Marshall Wace

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

At Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LKQ over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the number one position in LKQ Corporation (NASDAQ:LKQ). ValueAct Capital has a $1.0844 billion position in the stock, comprising 12.6% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $249 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Michael O’Keefe’s 12th Street Asset Management, Wallace Weitz’s Wallace R. Weitz & Co. and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to LKQ Corporation (NASDAQ:LKQ), around 12.56% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, setting aside 8.41 percent of its 13F equity portfolio to LKQ.

Consequently, key hedge funds have been driving this bullishness. TwinBeech Capital, managed by Jinghua Yan, initiated the most outsized position in LKQ Corporation (NASDAQ:LKQ). TwinBeech Capital had $5.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Paul Tudor Jones’s Tudor Investment Corp, and Bruce Kovner’s Caxton Associates LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LKQ Corporation (NASDAQ:LKQ) but similarly valued. We will take a look at ABIOMED, Inc. (NASDAQ:ABMD), KANZHUN LIMITED (NASDAQ:BZ), NortonLifeLock Inc. (NASDAQ:NLOK), Plug Power, Inc. (NASDAQ:PLUG), CenterPoint Energy, Inc. (NYSE:CNP), Albertsons Companies, Inc. (NYSE:ACI), and Apollo Global Management Inc (NYSE:APO). This group of stocks’ market valuations are similar to LKQ’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $1570 million. That figure was $1695 million in LKQ’s case. Apollo Global Management Inc (NYSE:APO) is the most popular stock in this table. On the other hand CenterPoint Energy, Inc. (NYSE:CNP) is the least popular one with only 14 bullish hedge fund positions. LKQ Corporation (NASDAQ:LKQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LKQ is 66.3. 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 gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on LKQ as the stock returned 11.6% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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