Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year through September 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like LiLAC Group (NASDAQ:LILAK).
LiLAC Group (NASDAQ:LILAK) investors should pay attention to an increase in hedge fund sentiment in recent months. Our calculations also showed that LILAK isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are viewed as worthless, outdated financial tools of the past. While there are over 8000 funds in operation at present, Our experts hone in on the leaders of this group, around 750 funds. These investment experts oversee bulk of the hedge fund industry’s total capital, and by tracking their unrivaled picks, Insider Monkey has found many investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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 latest hedge fund action regarding LiLAC Group (NASDAQ:LILAK).
What have hedge funds been doing with LiLAC Group (NASDAQ:LILAK)?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LILAK over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, William Crowley, William Harker, and Stephen Blass’s Ashe Capital has the number one position in LiLAC Group (NASDAQ:LILAK), worth close to $117.8 million, corresponding to 9.3% of its total 13F portfolio. The second most bullish fund manager is Debra Fine of Fine Capital Partners, with a $104.5 million position; 18.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass Ryan Pedlow’s Two Creeks Capital Management, Wallace Weitz’s Wallace R. Weitz & Co. and Steven Tananbaum’s GoldenTree Asset Management.
Now, key money managers were leading the bulls’ herd. Arrowgrass Capital Partners, managed by Nick Niell, established the most valuable position in LiLAC Group (NASDAQ:LILAK). Arrowgrass Capital Partners had $7.4 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $2.4 million investment in the stock during the quarter. The other funds with brand new LILAK positions are Jeffrey Talpins’s Element Capital Management, Glenn Russell Dubin’s Highbridge Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as LiLAC Group (NASDAQ:LILAK) but similarly valued. These stocks are Five9 Inc (NASDAQ:FIVN), Boyd Gaming Corporation (NYSE:BYD), J&J Snack Foods Corp. (NASDAQ:JJSF), and B2Gold Corp (NYSEMKT:BTG). This group of stocks’ market caps are similar to LILAK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIVN | 23 | 478688 | -2 |
| BYD | 30 | 350426 | 2 |
| JJSF | 13 | 81274 | -1 |
| BTG | 17 | 145412 | 1 |
| Average | 20.75 | 263950 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $397 million in LILAK’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 13 bullish hedge fund positions. LiLAC Group (NASDAQ:LILAK) 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 LILAK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LILAK were disappointed as the stock returned -0.6% 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.
