Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Laredo Petroleum Inc (NYSE:LPI).
Laredo Petroleum Inc (NYSE:LPI) was in 14 hedge funds’ portfolios at the end of December. LPI has experienced a decrease in hedge fund interest recently. There were 20 hedge funds in our database with LPI holdings at the end of the previous quarter. Our calculations also showed that lpi isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to view the new hedge fund action surrounding Laredo Petroleum Inc (NYSE:LPI).
What have hedge funds been doing with Laredo Petroleum Inc (NYSE:LPI)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the second quarter of 2018. On the other hand, there were a total of 15 hedge funds with a bullish position in LPI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, SailingStone Capital Partners held the most valuable stake in Laredo Petroleum Inc (NYSE:LPI), which was worth $138.3 million at the end of the fourth quarter. On the second spot was Water Street Capital which amassed $20.8 million worth of shares. Moreover, Millennium Management, GLG Partners, and Citadel Investment Group were also bullish on Laredo Petroleum Inc (NYSE:LPI), allocating a large percentage of their portfolios to this stock.
Seeing as Laredo Petroleum Inc (NYSE:LPI) has witnessed falling interest from the smart money, it’s easy to see that there were a few funds that slashed their full holdings heading into Q3. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management sold off the largest investment of all the hedgies watched by Insider Monkey, comprising close to $29.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $16.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 6 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Laredo Petroleum Inc (NYSE:LPI) but similarly valued. We will take a look at The Gorman-Rupp Company (NYSE:GRC), The Andersons, Inc. (NASDAQ:ANDE), OFG Bancorp (NYSE:OFG), and Star Bulk Carriers Corp. (NASDAQ:SBLK). All of these stocks’ market caps match LPI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GRC | 7 | 34299 | -2 |
| ANDE | 6 | 47316 | -2 |
| OFG | 17 | 59845 | 6 |
| SBLK | 19 | 456049 | 3 |
| Average | 12.25 | 149377 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $196 million in LPI’s case. Star Bulk Carriers Corp. (NASDAQ:SBLK) is the most popular stock in this table. On the other hand The Andersons, Inc. (NASDAQ:ANDE) is the least popular one with only 6 bullish hedge fund positions. Laredo Petroleum Inc (NYSE:LPI) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately LPI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on LPI were disappointed as the stock returned -8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
