Is La-Z-Boy Incorporated (LZB) A Good Stock To Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. 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. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. 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 La-Z-Boy Incorporated (NYSE:LZB).

La-Z-Boy Incorporated (NYSE:LZB) has experienced an increase in enthusiasm from smart money recently. LZB was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 16 hedge funds in our database with LZB holdings at the end of the previous quarter. 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 Air Methods Corp (NASDAQ:AIRM), OneBeacon Insurance Group, Ltd. (NYSE:OB), and Advanced Micro Devices, Inc. (NYSE:AMD) to gather more data points.

In the 21st century investor’s toolkit there are several metrics investors have at their disposal to evaluate stocks. Two of the most under-the-radar metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace their index-focused peers by a significant amount (see the details here).

Now, we’re going to go over the new action encompassing La-Z-Boy Incorporated (NYSE:LZB).

How are hedge funds trading La-Z-Boy Incorporated (NYSE:LZB)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 13% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in La-Z-Boy Incorporated (NYSE:LZB). The fund reportedly holds a $26.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $14.2 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions comprise D. E. Shaw’s D E Shaw, Dmitry Balyasny’s Balyasny Asset Management and Jim Simons’s Renaissance Technologies.

As one would reasonably expect, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in La-Z-Boy Incorporated (NYSE:LZB). As reported in its latest 13F filing, the fund had $8.5 million invested in the company at the end of the quarter. Steve Pei’s Gratia Capital also made a $3.5 million investment in the stock during the quarter. The other funds with brand new LZB positions are John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s now review hedge fund activity in other stocks similar to La-Z-Boy Incorporated (NYSE:LZB). These stocks are Air Methods Corp (NASDAQ:AIRM), OneBeacon Insurance Group, Ltd. (NYSE:OB), Advanced Micro Devices, Inc. (NYSE:AMD), and Descartes Systems Group (USA) (NASDAQ:DSGX). All of these stocks’ market caps are similar to LZB’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure in LZB’s case considerably exceeds the average and stands at $84 million. Air Methods Corp (NASDAQ:AIRM) is the most popular stock in this table, while Descartes Systems Group (USA) (NASDAQ:DSGX) is the least popular one with only 4 bullish hedge fund positions. La-Z-Boy Incorporated (NYSE:LZB) shares the first place with AIRM and, considering the fact that both companies have attracted a similar amount of the hedge funds’ money, we believe both stocks warrant further research to find the most suitable candidate for a long position.