Is Lifeway Foods, Inc. (NASDAQ:LWAY) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Lifeway Foods, Inc. (NASDAQ:LWAY) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CSS Industries, Inc. (NYSE:CSS), Willamette Valley Vineyards, Inc. (NASDAQ:WVVI), and iFresh Inc. (NASDAQ:IFMK) to gather more data points. Our calculations also showed that LWAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s review the latest hedge fund action surrounding Lifeway Foods, Inc. (NASDAQ:LWAY).
What have hedge funds been doing with Lifeway Foods, Inc. (NASDAQ:LWAY)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in LWAY a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the number one position in Lifeway Foods, Inc. (NASDAQ:LWAY), worth close to $0.8 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is GAMCO Investors, led by Mario Gabelli, holding a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Israel Englander’s Millennium Management, Kahn Brothers and . In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Lifeway Foods, Inc. (NASDAQ:LWAY), around 0.0028% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.0027 percent of its 13F equity portfolio to LWAY.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to Lifeway Foods, Inc. (NASDAQ:LWAY). These stocks are CSS Industries, Inc. (NYSE:CSS), Willamette Valley Vineyards, Inc. (NASDAQ:WVVI), iFresh Inc. (NASDAQ:IFMK), and China SXT Pharmaceuticals, Inc. (NASDAQ:SXTC). All of these stocks’ market caps are closest to LWAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSS | 4 | 2464 | -3 |
| WVVI | 1 | 679 | 0 |
| IFMK | 1 | 56 | -1 |
| SXTC | 2 | 2556 | 1 |
| Average | 2 | 1439 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in LWAY’s case. CSS Industries, Inc. (NYSE:CSS) is the most popular stock in this table. On the other hand Willamette Valley Vineyards, Inc. (NASDAQ:WVVI) is the least popular one with only 1 bullish hedge fund positions. Lifeway Foods, Inc. (NASDAQ:LWAY) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LWAY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LWAY were disappointed as the stock returned -6.8% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
