Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards L Brands Inc (NYSE:LB).
L Brands Inc (NYSE:LB) has seen a decrease in hedge fund interest of late. At the end of this article we will also compare LB to other stocks including BB&T Corporation (NYSE:BBT), Synchrony Financial (NYSE:SYF), and American Airlines Group Inc (NASDAQ:AAL) to get a better sense of its popularity.
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If you’d ask most investors, hedge funds are seen as worthless, old investment vehicles of years past. While there are more than 8000 funds trading at the moment, Our researchers look at the top tier of this club, about 700 funds. These money managers direct bulk of the hedge fund industry’s total capital, and by keeping track of their unrivaled stock picks, Insider Monkey has unearthed several investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Now, we’re going to view the latest action encompassing L Brands Inc (NYSE:LB).
Hedge fund activity in L Brands Inc (NYSE:LB)
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Gavin M. Abrams’ Abrams Bison Investments has the biggest position in L Brands Inc (NYSE:LB), worth close to $238.9 million, comprising 26.2% of its total 13F portfolio. The second most bullish fund manager is Columbus Circle Investors holding a $146.7 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain Ken Griffin’s Citadel Investment Group, Cliff Asness’ AQR Capital Management and Murray Stahl’s Horizon Asset Management.
Due to the fact that L Brands Inc (NYSE:LB) has experienced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Jim Simons’ Renaissance Technologies dumped the biggest position of the 700 funds watched by Insider Monkey, valued at an estimated $73.9 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dumped its stock, about $25.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to L Brands Inc (NYSE:LB). We will take a look at BB&T Corporation (NYSE:BBT), Synchrony Financial (NYSE:SYF), American Airlines Group Inc (NASDAQ:AAL), and Intercontinental Exchange Inc (NYSE:ICE). This group of stocks’ market values are similar to LB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BBT | 30 | 791692 | 9 |
| SYF | 21 | 291570 | 8 |
| AAL | 77 | 1824096 | -8 |
| ICE | 38 | 2017380 | -5 |
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $1231 million. That figure was $2211 million in LB’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Synchrony Financial (NYSE:SYF) is the least popular one with only 21 bullish hedge fund positions. L Brands Inc (NYSE:LB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AAL might be a better candidate to consider a long position.
