We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Loews Corporation (NYSE:L) based on those filings.
Is Loews Corporation (NYSE:L) a healthy stock for your portfolio? The best stock pickers are getting less optimistic. The number of long hedge fund positions dropped by 6 recently. Our calculations also showed that L isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). L was in 24 hedge funds’ portfolios at the end of December. There were 30 hedge funds in our database with L holdings at the end of the previous quarter.
In today’s marketplace there are several formulas market participants use to size up publicly traded companies. A duo of the most underrated formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the S&P 500 by a very impressive amount (see the details here).
Ric Dillon of Diamond Hill Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the new hedge fund action surrounding Loews Corporation (NYSE:L).
How have hedgies been trading Loews Corporation (NYSE:L)?
Heading into the first quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in L over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of Loews Corporation (NYSE:L), with a stake worth $141.5 million reported as of the end of September. Trailing Diamond Hill Capital was Wallace Capital Management, which amassed a stake valued at $21.5 million. Levin Capital Strategies, Hosking Partners, and D E Shaw 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 Wallace Capital Management allocated the biggest weight to Loews Corporation (NYSE:L), around 2.95% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, dishing out 1.53 percent of its 13F equity portfolio to L.
Since Loews Corporation (NYSE:L) has experienced falling interest from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their full holdings in the third quarter. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $1.7 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dumped about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 6 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Loews Corporation (NYSE:L) but similarly valued. We will take a look at Huntington Bancshares Incorporated (NASDAQ:HBAN), Cheniere Energy, Inc. (NYSE:LNG), Arista Networks Inc (NYSE:ANET), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks’ market valuations resemble L’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBAN | 25 | 44928 | 3 |
| LNG | 43 | 3483314 | 0 |
| ANET | 26 | 284265 | 3 |
| SSNC | 59 | 1996210 | 13 |
| Average | 38.25 | 1452179 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $1452 million. That figure was $214 million in L’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Huntington Bancshares Incorporated (NASDAQ:HBAN) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Loews Corporation (NYSE:L) is even less popular than HBAN. Hedge funds dodged a bullet by taking a bearish stance towards L. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately L wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); L investors were disappointed as the stock returned -36.3% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
