Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Lifeway Foods, Inc. (NASDAQ:LWAY).
Lifeway Foods, Inc. (NASDAQ:LWAY) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Evogene Ltd. (NASDAQ:EVGN), Exela Technologies, Inc. (NASDAQ:XELA), and T.A.T. Technologies Ltd. (NASDAQ:TATT) to gather more data points. Our calculations also showed that LWAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the key hedge fund action surrounding Lifeway Foods, Inc. (NASDAQ:LWAY).
What have hedge funds been doing with Lifeway Foods, Inc. (NASDAQ:LWAY)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LWAY over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Lifeway Foods, Inc. (NASDAQ:LWAY), which was worth $0.7 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $0.1 million worth of shares. Kahn Brothers was 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 Kahn Brothers allocated the biggest weight to Lifeway Foods, Inc. (NASDAQ:LWAY), around 0.0035% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.0017 percent of its 13F equity portfolio to LWAY.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Lifeway Foods, Inc. (NASDAQ:LWAY). These stocks are Evogene Ltd. (NASDAQ:EVGN), Exela Technologies, Inc. (NASDAQ:XELA), T.A.T. Technologies Ltd. (NASDAQ:TATT), and Akari Therapeutics, Plc (NASDAQ:AKTX). This group of stocks’ market valuations are closest to LWAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVGN | 2 | 820 | 0 |
| XELA | 7 | 7604 | 1 |
| TATT | 1 | 732 | 0 |
| AKTX | 1 | 188 | 0 |
| Average | 2.75 | 2336 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in LWAY’s case. Exela Technologies, Inc. (NASDAQ:XELA) is the most popular stock in this table. On the other hand T.A.T. Technologies Ltd. (NASDAQ:TATT) is the least popular one with only 1 bullish hedge fund positions. Lifeway Foods, Inc. (NASDAQ:LWAY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on LWAY as the stock returned 35.9% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
