As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Lands’ End, Inc. (NASDAQ:LE).
Lands’ End, Inc. (NASDAQ:LE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare LE to other stocks including McDermott International, Inc. (NYSE:MDR), Owens & Minor, Inc. (NYSE:OMI), and Tecnoglass Inc. (NASDAQ:TGLS) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Edward Lampert of ESL Investments
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. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the key hedge fund action surrounding Lands’ End, Inc. (NASDAQ:LE).
How are hedge funds trading Lands’ End, Inc. (NASDAQ:LE)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LE over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, ESL Investments, managed by Edward Lampert, holds the largest position in Lands’ End, Inc. (NASDAQ:LE). ESL Investments has a $57 million position in the stock, comprising 28% of its 13F portfolio. On ESL Investments’s heels is Ken Griffin of Citadel Investment Group, with a $2.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David E. Shaw’s D E Shaw and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position ESL Investments allocated the biggest weight to Lands’ End, Inc. (NASDAQ:LE), around 27.95% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to LE.
Because Lands’ End, Inc. (NASDAQ:LE) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their positions entirely heading into Q4. At the top of the heap, Sander Gerber’s Hudson Bay Capital Management dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $1.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.7 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Lands’ End, Inc. (NASDAQ:LE). We will take a look at McDermott International, Inc. (NYSE:MDR), Owens & Minor, Inc. (NYSE:OMI), Tecnoglass Inc. (NASDAQ:TGLS), and Old Second Bancorp Inc. (NASDAQ:OSBC). This group of stocks’ market valuations are similar to LE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDR | 19 | 52301 | -3 |
| OMI | 16 | 38684 | 3 |
| TGLS | 8 | 11898 | 3 |
| OSBC | 9 | 32875 | -3 |
| Average | 13 | 33940 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $69 million in LE’s case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Tecnoglass Inc. (NASDAQ:TGLS) is the least popular one with only 8 bullish hedge fund positions. Lands’ End, Inc. (NASDAQ:LE) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LE investors were disappointed as the stock returned 3.8% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
