“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Landec Corporation (NASDAQ:LNDC) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Landec Corporation (NASDAQ:LNDC) worth your attention right now? The smart money is becoming more confident. The number of long hedge fund positions advanced by 3 lately. Our calculations also showed that LNDC isn’t among the 30 most popular stocks among hedge funds (see the video below). LNDC was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with LNDC positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the key hedge fund action regarding Landec Corporation (NASDAQ:LNDC).
How have hedgies been trading Landec Corporation (NASDAQ:LNDC)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in LNDC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Wynnefield Capital was the largest shareholder of Landec Corporation (NASDAQ:LNDC), with a stake worth $26.2 million reported as of the end of March. Trailing Wynnefield Capital was Royce & Associates, which amassed a stake valued at $3.6 million. Renaissance Technologies, Ancora Advisors, and Algert Coldiron Investors were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Engine Capital, managed by Arnaud Ajdler, established the most outsized position in Landec Corporation (NASDAQ:LNDC). Engine Capital had $0.4 million invested in the company at the end of the quarter. Bradley Louis Radoff’s Fondren Management also initiated a $0.2 million position during the quarter. The following funds were also among the new LNDC investors: Ken Griffin’s Citadel Investment Group and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now review hedge fund activity in other stocks similar to Landec Corporation (NASDAQ:LNDC). We will take a look at Ocwen Financial Corporation (NYSE:OCN), ConforMIS, Inc. (NASDAQ:CFMS), Fang Holdings Limited (NYSE:SFUN), and Craft Brew Alliance Inc (NASDAQ:BREW). This group of stocks’ market valuations resemble LNDC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OCN | 10 | 32774 | -5 |
| CFMS | 7 | 61522 | 3 |
| SFUN | 6 | 458 | -2 |
| BREW | 12 | 20822 | 1 |
| Average | 8.75 | 28894 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $33 million in LNDC’s case. Craft Brew Alliance Inc (NASDAQ:BREW) is the most popular stock in this table. On the other hand Fang Holdings Limited (NYSE:SFUN) is the least popular one with only 6 bullish hedge fund positions. Landec Corporation (NASDAQ:LNDC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LNDC as the stock returned 16% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
