Hedge Funds Are Betting On Lithia Motors Inc (LAD)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Lithia Motors Inc (NYSE:LAD) in this article.

Is Lithia Motors Inc (NYSE:LAD) worth your attention right now? The best stock pickers are turning bullish. The number of bullish hedge fund bets advanced by 2 in recent months. 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 BWX Technologies Inc (NYSE:BWXT), Jack in the Box Inc. (NASDAQ:JACK), and Aspen Insurance Holdings Limited (NYSE:AHL) to gather more data points.

In the eyes of most shareholders, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading at the moment, our researchers hone in on the upper echelon of this group, about 700 funds. These hedge fund managers shepherd the lion’s share of all hedge funds’ total asset base, and by monitoring their inimitable picks, Insider Monkey has uncovered numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s take a look at the latest action surrounding Lithia Motors Inc (NYSE:LAD).

What does the smart money think about Lithia Motors Inc (NYSE:LAD)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 10% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Larry Robbins’ Glenview Capital has the number one position in Lithia Motors Inc (NYSE:LAD), worth close to $81.6 million, comprising 0.4% of its total 13F portfolio. The second most bullish fund manager is Park West Asset Management, led by Peter S. Park, holding a $40.7 million position; 3.7% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management, Alexander Mitchell’s Scopus Asset Management, and Lee Munder’s Lee Munder Capital Group.

Consequently, key hedge funds were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest call position in Lithia Motors Inc (NYSE:LAD). PEAK6 Capital Management had $4.5 million invested in the company at the end of the quarter. Josh Goldberg’s G2 Investment Partners Management also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Sandler’s Sandler Capital Management, Israel Englander’s Millennium Management, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Lithia Motors Inc (NYSE:LAD). We will take a look at BWX Technologies Inc (NYSE:BWXT), Jack in the Box Inc. (NASDAQ:JACK), Aspen Insurance Holdings Limited (NYSE:AHL), and Telecom Argentina S.A. (ADR) (NYSE:TEO). This group of stocks’ market valuations are similar to Lithia Motors Inc (NYSE:LAD)’s market valuation.

As you can see, these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $294 million in Lithia Motors Inc (NYSE:LAD)’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand, Telecom Argentina S.A. (ADR) (NYSE:TEO) is the least popular one with only 11 bullish hedge fund positions. Lithia Motors Inc (NYSE:LAD) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Jack in the Box Inc. (NASDAQ:JACK) might be a better candidate to consider a long position.