2018’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards LogMeIn Inc (NASDAQ:LOGM) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Is LogMeIn Inc (NASDAQ:LOGM) going to take off soon? Prominent investors are becoming hopeful. The number of long hedge fund bets advanced by 2 in recent months. Our calculations also showed that LOGM 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). LOGM was in 29 hedge funds’ portfolios at the end of the third quarter of 2019. There were 27 hedge funds in our database with LOGM positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Now we’re going to analyze the fresh hedge fund action regarding LogMeIn Inc (NASDAQ:LOGM).
What does smart money think about LogMeIn Inc (NASDAQ:LOGM)?
Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in LOGM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in LogMeIn Inc (NASDAQ:LOGM), which was worth $56.1 million at the end of the third quarter. On the second spot was GLG Partners which amassed $53.8 million worth of shares. D E Shaw, AQR Capital Management, and Cove Street Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to LogMeIn Inc (NASDAQ:LOGM), around 2.55% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, dishing out 2.35 percent of its 13F equity portfolio to LOGM.
As one would reasonably expect, key hedge funds have jumped into LogMeIn Inc (NASDAQ:LOGM) headfirst. Cove Street Capital, managed by Jeffrey Bronchick, established the most valuable position in LogMeIn Inc (NASDAQ:LOGM). Cove Street Capital had $18.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $10.7 million position during the quarter. The following funds were also among the new LOGM investors: Michael Hintze’s CQS Cayman LP, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LogMeIn Inc (NASDAQ:LOGM) but similarly valued. These stocks are United Therapeutics Corporation (NASDAQ:UTHR), Univar Solutions Inc. (NYSE:UNVR), Medallia, Inc. (NYSE:MDLA), and Bank of Hawaii Corporation (NYSE:BOH). This group of stocks’ market caps resemble LOGM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UTHR | 30 | 1131522 | 0 |
| UNVR | 37 | 1331993 | 6 |
| MDLA | 23 | 250641 | 23 |
| BOH | 13 | 104848 | 1 |
| Average | 25.75 | 704751 | 7.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $295 million in LOGM’s case. Univar Solutions Inc. (NYSE:UNVR) is the most popular stock in this table. On the other hand Bank of Hawaii Corporation (NYSE:BOH) is the least popular one with only 13 bullish hedge fund positions. LogMeIn Inc (NASDAQ:LOGM) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately LOGM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LOGM were disappointed as the stock returned 6.9% in 2019 and trailed 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.
