The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Lands’ End, Inc. (NASDAQ:LE) from the perspective of those elite funds.
Lands’ End, Inc. (NASDAQ:LE) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that LE isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Let’s take a gander at the recent hedge fund action encompassing Lands’ End, Inc. (NASDAQ:LE).
What does smart money think about Lands’ End, Inc. (NASDAQ:LE)?
Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in LE a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Lands’ End, Inc. (NASDAQ:LE) was held by ESL Investments, which reported holding $62.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $1.6 million position. Other investors bullish on the company included Citadel Investment Group, GAMCO Investors, and Hudson Bay Capital Management.
Because Lands’ End, Inc. (NASDAQ:LE) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of money managers who sold off their full holdings last quarter. At the top of the heap, Philippe Laffont’s Coatue Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $0.9 million in stock. Andrew Feldstein and Stephen Siderow’s fund, Blue Mountain Capital, also cut its stock, about $0.6 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Lands’ End, Inc. (NASDAQ:LE). We will take a look at Telenav Inc (NASDAQ:TNAV), MarineMax, Inc. (NYSE:HZO), Roadrunner Transportation Systems Inc (NYSE:RRTS), and Inseego Corp. (NASDAQ:INSG). This group of stocks’ market caps are similar to LE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TNAV | 12 | 90686 | 2 |
| HZO | 7 | 7939 | -4 |
| RRTS | 2 | 325001 | -5 |
| INSG | 8 | 21906 | -7 |
| Average | 7.25 | 111383 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $72 million in LE’s case. Telenav Inc (NASDAQ:TNAV) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 2 bullish hedge fund positions. Lands’ End, Inc. (NASDAQ:LE) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LE were disappointed as the stock returned -7.2% during the third quarter 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.
