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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Lear Corporation (NYSE:LEA) and determine whether the smart money was really smart about this stock.
Is Lear Corporation (NYSE:LEA) a healthy stock for your portfolio? The smart money was becoming hopeful. The number of long hedge fund positions moved up by 13 in recent months. Lear Corporation (NYSE:LEA) was in 41 hedge funds’ portfolios at the end of June. The all time high for this statistics is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LEA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most traders, hedge funds are seen as worthless, old investment vehicles of years past. While there are over 8000 funds in operation today, Our experts choose to focus on the top tier of this club, about 850 funds. It is estimated that this group of investors shepherd most of the smart money’s total capital, and by keeping an eye on their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the key hedge fund action surrounding Lear Corporation (NYSE:LEA).
What have hedge funds been doing with Lear Corporation (NYSE:LEA)?
At Q2’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LEA over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Lear Corporation (NYSE:LEA), which was worth $541 million at the end of the third quarter. On the second spot was Paradice Investment Management which amassed $67.7 million worth of shares. Balyasny Asset Management, Candlestick Capital Management, and Adage 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 Paradice Investment Management allocated the biggest weight to Lear Corporation (NYSE:LEA), around 5.09% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, designating 3.53 percent of its 13F equity portfolio to LEA.
As one would reasonably expect, some big names were breaking ground themselves. Candlestick Capital Management, managed by Jack Woodruff, assembled the most outsized position in Lear Corporation (NYSE:LEA). Candlestick Capital Management had $34.2 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $34.1 million investment in the stock during the quarter. The following funds were also among the new LEA investors: Edgar Wachenheim’s Greenhaven Associates, Robert Pohly’s Samlyn Capital, and Alexander Mitchell’s Scopus Asset Management.
Let’s check out hedge fund activity in other stocks similar to Lear Corporation (NYSE:LEA). These stocks are Bausch Health Companies Inc. (NYSE:BHC), Kingsoft Cloud Holdings Limited (NASDAQ:KC), Repligen Corporation (NASDAQ:RGEN), GrubHub Inc (NYSE:GRUB), Federal Realty Investment Trust (NYSE:FRT), Plains All American Pipeline, L.P. (NYSE:PAA), and Amedisys Inc (NASDAQ:AMED). All of these stocks’ market caps are similar to LEA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHC | 35 | 1745572 | 0 |
| KC | 20 | 62450 | 20 |
| RGEN | 34 | 688852 | 13 |
| GRUB | 52 | 1080219 | 20 |
| FRT | 20 | 76045 | -4 |
| PAA | 9 | 65144 | 1 |
| AMED | 30 | 375114 | 10 |
| Average | 28.6 | 584771 | 8.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $585 million. That figure was $896 million in LEA’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 9 bullish hedge fund positions. Lear Corporation (NYSE:LEA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LEA is 77.2. 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. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LEA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LEA were disappointed as the stock returned 4.5% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
