In this article we will check out the progression of hedge fund sentiment towards Lithia Motors Inc (NYSE:LAD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Lithia Motors Inc (NYSE:LAD) undervalued? Prominent investors were getting more optimistic. The number of long hedge fund bets inched up by 1 in recent months. Lithia Motors Inc (NYSE:LAD) was in 64 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 63. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. Our calculations also showed that LAD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Lithia Motors Inc (NYSE:LAD).
David Abrams of Abrams Capital Management
Do Hedge Funds Think LAD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. By comparison, 49 hedge funds held shares or bullish call options in LAD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Abrams Capital Management held the most valuable stake in Lithia Motors Inc (NYSE:LAD), which was worth $745.4 million at the end of the third quarter. On the second spot was Viking Global which amassed $254.7 million worth of shares. Southpoint Capital Advisors, Lyrical Asset Management, and Sachem Head Capital 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 Abrams Capital Management allocated the biggest weight to Lithia Motors Inc (NYSE:LAD), around 16.26% of its 13F portfolio. Tensile Capital is also relatively very bullish on the stock, designating 11.62 percent of its 13F equity portfolio to LAD.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Sachem Head Capital, managed by Scott Ferguson, established the most outsized position in Lithia Motors Inc (NYSE:LAD). Sachem Head Capital had $134 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $19.4 million position during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Peter Avellone’s Cartenna Capital, and Stanley Druckenmiller’s Duquesne Capital.
Let’s also examine hedge fund activity in other stocks similar to Lithia Motors Inc (NYSE:LAD). We will take a look at Amdocs Limited (NASDAQ:DOX), NiSource Inc. (NYSE:NI), TFI International Inc. (NYSE:TFII), The Middleby Corporation (NASDAQ:MIDD), Altice USA, Inc. (NYSE:ATUS), CAE, Inc. (NYSE:CAE), and China Southern Airlines Co Ltd (NYSE:ZNH). All of these stocks’ market caps are similar to LAD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOX | 24 | 824398 | -5 |
| NI | 24 | 435539 | -12 |
| TFII | 23 | 270343 | 10 |
| MIDD | 29 | 567959 | -6 |
| ATUS | 59 | 1167928 | 15 |
| CAE | 7 | 83687 | -3 |
| ZNH | 3 | 8197 | 1 |
| Average | 24.1 | 479722 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $480 million. That figure was $2823 million in LAD’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Lithia Motors Inc (NYSE:LAD) is more popular among hedge funds. Our overall hedge fund sentiment score for LAD is 86. 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. Unfortunately LAD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LAD were disappointed as the stock returned -8% since the end of the third quarter (through 11/30) 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.
Follow Lithia Motors Inc (NYSE:LAD)
Follow Lithia Motors Inc (NYSE:LAD)
Suggested Articles:
Disclosure: None. This article was originally published at Insider Monkey.
