Hedge Fund Sentiment For Lowe’s Companies, Inc. (LOW) Is Stagnating

Hedge fund managers like David Einhorn, Dan Loeb, and Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in a large-cap stock: Lowe’s Companies, Inc. (NYSE:LOW).

Hedge fund interest in Lowe’s Companies, Inc. (NYSE:LOW) shares was flat during the last quarter. This is usually a negative indicator. At the end of this article we will also compare LOW to other stocks including Costco Wholesale Corporation (NASDAQ:COST), Priceline.com Inc (NASDAQ:PCLN), and Barclays PLC (ADR) (NYSE:BCS) to get a better sense of its popularity.

To most investors, hedge funds are assumed to be worthless, outdated financial tools of years past. While there are greater than 8,000 funds trading today, our experts hone in on the moguls of this group, approximately 700 funds. Most estimates calculate that this group of people orchestrate the lion’s share of all hedge funds’ total asset base, and by keeping track of their first-class equity investments, Insider Monkey has determined numerous investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s view the fresh action surrounding Lowe’s Companies, Inc. (NYSE:LOW).

How are hedge funds trading Lowe’s Companies, Inc. (NYSE:LOW)?

At Q3’s end, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or had already accumulated large positions).

Of the funds tracked by Insider Monkey, Edgar Wachenheim’s Greenhaven Associates has the number one position in Lowe’s Companies, Inc. (NYSE:LOW), worth close to $678.3 million, comprising 13.5% of its total 13F portfolio. The second-most bullish fund manager is Iridian Asset Management, led by David Cohen and Harold Levy, holding a $530.2 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Cliff Asness’ AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Israel Englander’s Millennium Management.

Seeing as Lowe’s Companies, Inc. (NYSE:LOW) has witnessed stagnant sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that also slashed their positions entirely last quarter. It’s worth mentioning that Stephen Mandel’s Lone Pine Capital sold off the largest position of the “upper crust” of funds watched by Insider Monkey, worth about $472.4 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its stock, about $34.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Lowe’s Companies, Inc. (NYSE:LOW). These stocks are Costco Wholesale Corporation (NASDAQ:COST), Priceline.com Inc (NASDAQ:PCLN), Barclays PLC (ADR) (NYSE:BCS), and Rio Tinto plc (ADR) (NYSE:RIO). This group of stocks’ market caps are similar to LOW’s market cap.

As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $2.33 billion. That figure was $3.35 billion in LOW’s case. Priceline.com Inc (NASDAQ:PCLN) is the most popular stock in this table. On the other hand Barclays PLC (ADR) (NYSE:BCS) is the least popular one with only 15 bullish hedge fund positions. Lowe’s Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average, as is the amount of money invested in it. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PCLN might be a better candidate to consider a long position in.