Is Luther Burbank Corporation (NASDAQ:LBC) 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 have 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.
Is Luther Burbank Corporation (NASDAQ:LBC) worth your attention right now? The smart money is taking a bullish view. The number of bullish hedge fund positions inched up by 1 lately. Our calculations also showed that LBC isn’t among the 30 most popular stocks among hedge funds (see the video below). LBC was in 7 hedge funds’ portfolios at the end of June. There were 6 hedge funds in our database with LBC holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Michael Price of MFP Investors
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the new hedge fund action surrounding Luther Burbank Corporation (NASDAQ:LBC).
Hedge fund activity in Luther Burbank Corporation (NASDAQ:LBC)
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the first quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in LBC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Luther Burbank Corporation (NASDAQ:LBC) was held by MFP Investors, which reported holding $3.3 million worth of stock at the end of March. It was followed by Mendon Capital Advisors with a $3 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Millennium Management.
Consequently, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the largest position in Luther Burbank Corporation (NASDAQ:LBC). Millennium Management had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new LBC position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Luther Burbank Corporation (NASDAQ:LBC). These stocks are TherapeuticsMD Inc (NASDAQ:TXMD), FTS International, Inc. (NYSE:FTSI), Quanex Building Products Corporation (NYSE:NX), and Quotient Limited (NASDAQ:QTNT). This group of stocks’ market valuations resemble LBC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TXMD | 8 | 21158 | -1 |
| FTSI | 18 | 27543 | -3 |
| NX | 13 | 51317 | -3 |
| QTNT | 20 | 280265 | 0 |
| Average | 14.75 | 95071 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $10 million in LBC’s case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand TherapeuticsMD Inc (NASDAQ:TXMD) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Luther Burbank Corporation (NASDAQ:LBC) is even less popular than TXMD. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on LBC, though not to the same extent, as the stock returned 4.6% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
