In this article you are going to find out whether hedge funds think Lululemon Athletica inc. (NASDAQ:LULU) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Lululemon Athletica inc. (NASDAQ:LULU) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Lululemon Athletica inc. (NASDAQ:LULU) was in 41 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. Our calculations also showed that LULU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
David E. Shaw of D.E. Shaw
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 go over the new hedge fund action encompassing Lululemon Athletica inc. (NASDAQ:LULU).
Do Hedge Funds Think LULU Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LULU over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Lululemon Athletica inc. (NASDAQ:LULU), with a stake worth $234 million reported as of the end of September. Trailing Arrowstreet Capital was Citadel Investment Group, which amassed a stake valued at $190.1 million. Renaissance Technologies, D E Shaw, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to Lululemon Athletica inc. (NASDAQ:LULU), around 2.61% of its 13F portfolio. Value Star Asset Management is also relatively very bullish on the stock, designating 1.85 percent of its 13F equity portfolio to LULU.
Because Lululemon Athletica inc. (NASDAQ:LULU) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds that slashed their entire stakes by the end of the third quarter. At the top of the heap, Hyder Ahmad’s Broad Peak Investment Holdings said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth close to $86.9 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $71.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lululemon Athletica inc. (NASDAQ:LULU) but similarly valued. We will take a look at Public Storage (NYSE:PSA), NXP Semiconductors NV (NASDAQ:NXPI), Ferrari N.V. (NYSE:RACE), Itau Unibanco Holding SA (NYSE:ITUB), Takeda Pharmaceutical Company Limited (NYSE:TAK), Prudential Public Limited Company (NYSE:PUK), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks’ market values match LULU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSA | 35 | 1260285 | 8 |
| NXPI | 51 | 1080819 | -1 |
| RACE | 27 | 1177569 | 0 |
| ITUB | 16 | 379560 | 0 |
| TAK | 15 | 443627 | -4 |
| PUK | 4 | 10147 | 0 |
| CMG | 39 | 3687748 | 4 |
| Average | 26.7 | 1148536 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $1149 million. That figure was $709 million in LULU’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 4 bullish hedge fund positions. Lululemon Athletica inc. (NASDAQ:LULU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LULU is 63. 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 LULU as the stock returned 12.3% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Follow Lululemon Athletica Inc. (NASDAQ:LULU)
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Disclosure: None. This article was originally published at Insider Monkey.
