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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of LiLAC Group (NASDAQ:LILAK) based on that data.
LiLAC Group (NASDAQ:LILAK) has experienced a decrease in support from the world’s most elite money managers of late. Our calculations also showed that LILAK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
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 glance at the new hedge fund action encompassing LiLAC Group (NASDAQ:LILAK).
What have hedge funds been doing with LiLAC Group (NASDAQ:LILAK)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in LILAK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ashe Capital, managed by William Crowley, William Harker, and Stephen Blass, holds the most valuable position in LiLAC Group (NASDAQ:LILAK). Ashe Capital has a $145.1 million position in the stock, comprising 11.1% of its 13F portfolio. On Ashe Capital’s heels is Debra Fine of Fine Capital Partners, with a $88.1 million position; 23.3% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions comprise Ryan Pedlow’s Two Creeks Capital Management, Richard Merage’s MIG Capital and Wallace Weitz’s Wallace R. Weitz & Co.. In terms of the portfolio weights assigned to each position Fine Capital Partners allocated the biggest weight to LiLAC Group (NASDAQ:LILAK), around 23.29% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, earmarking 11.06 percent of its 13F equity portfolio to LILAK.
Since LiLAC Group (NASDAQ:LILAK) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $0.6 million in stock, and Jonathan Soros’s JS Capital was right behind this move, as the fund said goodbye to about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to LiLAC Group (NASDAQ:LILAK). We will take a look at Cameco Corporation (NYSE:CCJ), Tandem Diabetes Care Inc (NASDAQ:TNDM), Associated Banc Corp (NYSE:ASB), and Qurate Retail, Inc. (NASDAQ:QRTEA). This group of stocks’ market caps are closest to LILAK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCJ | 28 | 329012 | 3 |
| TNDM | 39 | 518462 | 2 |
| ASB | 24 | 191911 | 1 |
| QRTEA | 39 | 710121 | 4 |
| Average | 32.5 | 437377 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $437 million. That figure was $443 million in LILAK’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Associated Banc Corp (NYSE:ASB) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks LiLAC Group (NASDAQ:LILAK) is even less popular than ASB. Hedge funds dodged a bullet by taking a bearish stance towards LILAK. 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 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately LILAK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LILAK investors were disappointed as the stock returned -44% 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.
