Hedge Funds Are Selling LegacyTexas Financial Group Inc (LTXB)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards LegacyTexas Financial Group Inc (NASDAQ:LTXB).

Is LegacyTexas Financial Group Inc ready to rally soon? Prominent investors are reducing their bets on the stock. The number of bullish hedge fund bets went down by 1 in recent months. LTXB was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 11 hedge funds in our database with LTXB positions at the end of the previous quarter. At the end of this article we will also compare LTXB to other stocks including Synchronoss Technologies, Inc. (NASDAQ:SNCR), Greatbatch Inc (NYSE:GB), and Concordia Healthcare Corp (NASDAQ:CXRX) to get a better sense of its popularity.

Today there are tons of methods stock traders use to assess their stock investments. A duo of the most under-the-radar methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a solid margin (see the details here).

Keeping this in mind, let’s take a glance at the fresh action regarding LegacyTexas Financial Group Inc (NASDAQ:LTXB).

Hedge fund activity in LegacyTexas Financial Group Inc (NASDAQ:LTXB)

At the Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies holds the biggest position in LegacyTexas Financial Group Inc (NASDAQ:LTXB). Renaissance Technologies has a $42.4 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $14 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish encompass Legg Mason Capital Management, William Black’s Consector Capital and Joseph A. Jolson’s Harvest Capital Strategies.

Judging by the fact that LegacyTexas Financial Group Inc (NASDAQ:LTXB) has witnessed a declination in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest stake of the 700 funds monitored by Insider Monkey, totaling about $4.3 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $0.8 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as LegacyTexas Financial Group Inc (NASDAQ:LTXB) but similarly valued. These stocks are Synchronoss Technologies, Inc. (NASDAQ:SNCR), Greatbatch Inc (NYSE:GB), Concordia Healthcare Corp (NASDAQ:CXRX), and Fidelity & Guaranty Life (NYSE:FGL). This group of stocks’ market caps resemble LTXB’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $131 million, compared to $73 million in LTXB’s case. Synchronoss Technologies, Inc. (NASDAQ:SNCR) is the most popular stock in this table. On the other hand, Fidelity & Guaranty Life (NYSE:FGL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks, LegacyTexas Financial Group Inc (NASDAQ:LTXB) is even less popular than FGL. Considering that hedge funds aren’t fond of this stock in relation to other companies covered in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.