Hedge Funds Are Piling Into Leslie’s, Inc. (LESL)

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Leslie’s, Inc. (NASDAQ:LESL) makes for a good investment right now.

Leslie’s, Inc. (NASDAQ:LESL) has seen an increase in support from the world’s most elite money managers of late. Leslie’s, Inc. (NASDAQ:LESL) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LESL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a peek at the key hedge fund action regarding Leslie’s, Inc. (NASDAQ:LESL).

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

At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in LESL a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Leslie’s, Inc. (NASDAQ:LESL) was held by Third Point, which reported holding $169.1 million worth of stock at the end of June. It was followed by Islet Management with a $30.7 million position. Other investors bullish on the company included Woodson Capital Management, Marshall Wace LLP, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Thames Capital Management allocated the biggest weight to Leslie’s, Inc. (NASDAQ:LESL), around 1.92% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, dishing out 1.83 percent of its 13F equity portfolio to LESL.

As one would reasonably expect, key hedge funds have jumped into Leslie’s, Inc. (NASDAQ:LESL) headfirst. Islet Management, managed by Joseph Samuels, assembled the most valuable position in Leslie’s, Inc. (NASDAQ:LESL). Islet Management had $30.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $27.6 million investment in the stock during the quarter. The following funds were also among the new LESL investors: Jeffrey Talpins’s Element Capital Management, Ian Simm’s Impax Asset Management, and Simon Sadler’s Segantii Capital.

Let’s also examine hedge fund activity in other stocks similar to Leslie’s, Inc. (NASDAQ:LESL). These stocks are Everbridge, Inc. (NASDAQ:EVBG), The Wendy’s Company (NASDAQ:WEN), Altair Engineering Inc. (NASDAQ:ALTR), Alliance Data Systems Corporation (NYSE:ADS), Cyberark Software Ltd (NASDAQ:CYBR), Driven Brands Holdings Inc. (NASDAQ:DRVN), and ZIM Integrated Shipping Services Ltd. (NYSE:ZIM). This group of stocks’ market valuations resemble LESL’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 $736 million. That figure was $428 million in LESL’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Leslie’s, Inc. (NASDAQ:LESL) is more popular among hedge funds. Our overall hedge fund sentiment score for LESL is 90. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately LESL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LESL were disappointed as the stock returned -26.4% since the end of the second quarter (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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