Hedge Funds Are Selling Lamb Weston Holdings, Inc. (LW)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Lamb Weston Holdings, Inc. (NYSE:LW).

Is Lamb Weston Holdings, Inc. (NYSE:LW) worth your attention right now? The smart money is getting less bullish. The number of bullish hedge fund positions decreased by 3 lately. Our calculations also showed that LW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny cannabis play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the new hedge fund action surrounding Lamb Weston Holdings, Inc. (NYSE:LW).

What does smart money think about Lamb Weston Holdings, Inc. (NYSE:LW)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2019. By comparison, 41 hedge funds held shares or bullish call options in LW a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Lamb Weston Holdings, Inc. (NYSE:LW) was held by Renaissance Technologies, which reported holding $70.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $36.4 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and GLG Partners. In terms of the portfolio weights assigned to each position Cognios Capital allocated the biggest weight to Lamb Weston Holdings, Inc. (NYSE:LW), around 0.66% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to LW.

Seeing as Lamb Weston Holdings, Inc. (NYSE:LW) has experienced declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that slashed their entire stakes by the end of the first quarter. It’s worth mentioning that Lee Hicks and Jan Koerner’s Park Presidio Capital sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $68.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $8.7 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Lamb Weston Holdings, Inc. (NYSE:LW). We will take a look at Phillips 66 Partners LP (NYSE:PSXP), Imperial Oil Limited (NYSE:IMO), Magellan Midstream Partners, L.P. (NYSE:MMP), and Franklin Resources, Inc. (NYSE:BEN). All of these stocks’ market caps are closest to LW’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $277 million in LW’s case. Franklin Resources, Inc. (NYSE:BEN) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 bullish hedge fund positions. Lamb Weston Holdings, Inc. (NYSE:LW) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately LW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LW were disappointed as the stock returned 5.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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