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 Lamb Weston Holdings, Inc. (NYSE:LW) and compare its performance to hedge funds’ consensus picks in 2019.
Is Lamb Weston Holdings, Inc. (NYSE:LW) a buy here? The smart money is betting on the stock. The number of bullish hedge fund bets rose by 4 in recent months. Our calculations also showed that LW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). LW was in 33 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with LW positions at the end of the previous quarter.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
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 fresh hedge fund action surrounding Lamb Weston Holdings, Inc. (NYSE:LW).
How are hedge funds trading Lamb Weston Holdings, Inc. (NYSE:LW)?
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LW over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Marshall Wace, managed by Paul Marshall and Ian Wace, holds the number one position in Lamb Weston Holdings, Inc. (NYSE:LW). Marshall Wace has a $61.3 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is BlueDrive Global Investors, led by Oscar Hattink, holding a $47.9 million position; the fund has 14.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Lee Hicks and Jan Koerner’s Park Presidio Capital, Ryan Pedlow’s Two Creeks Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position BlueDrive Global Investors allocated the biggest weight to Lamb Weston Holdings, Inc. (NYSE:LW), around 14.31% of its 13F portfolio. Bodenholm Capital is also relatively very bullish on the stock, designating 12.05 percent of its 13F equity portfolio to LW.
Now, specific money managers have been driving this bullishness. BlueDrive Global Investors, managed by Oscar Hattink, assembled the biggest position in Lamb Weston Holdings, Inc. (NYSE:LW). BlueDrive Global Investors had $47.9 million invested in the company at the end of the quarter. Lee Hicks and Jan Koerner’s Park Presidio Capital also initiated a $47.3 million position during the quarter. The following funds were also among the new LW investors: Per Johansson’s Bodenholm Capital, Anand Parekh’s Alyeska Investment Group, and Christopher C. Grisanti’s Grisanti Brown & Partners.
Let’s also examine hedge fund activity in other stocks similar to Lamb Weston Holdings, Inc. (NYSE:LW). We will take a look at UGI Corp (NYSE:UGI), E*TRADE Financial Corporation (NASDAQ:ETFC), West Pharmaceutical Services Inc. (NYSE:WST), and Globe Life Inc. (NYSE:GL). This group of stocks’ market values are similar to LW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UGI | 19 | 317167 | -1 |
| ETFC | 39 | 875017 | -4 |
| WST | 30 | 494330 | 6 |
| GL | 19 | 828753 | 0 |
| Average | 26.75 | 628817 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $439 million in LW’s case. E*TRADE Financial Corporation (NASDAQ:ETFC) is the most popular stock in this table. On the other hand UGI Corp (NYSE:UGI) is the least popular one with only 19 bullish hedge fund positions. Lamb Weston Holdings, Inc. (NYSE:LW) 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately LW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LW were disappointed as the stock returned 17.5% in 2019 (through December 23rd) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
