A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Lantronix Inc (NASDAQ:LTRX).
Hedge fund interest in Lantronix Inc (NASDAQ:LTRX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LTRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Ocean Bio-Chem, Inc. (NASDAQ:OBCI), XpresSpa Group, Inc. (NASDAQ:XSPA), and PFSweb, Inc. (NASDAQ:PFSW) to gather more data points.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding Lantronix Inc (NASDAQ:LTRX).
Hedge fund activity in Lantronix Inc (NASDAQ:LTRX)
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LTRX over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Lantronix Inc (NASDAQ:LTRX), worth close to $2.8 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Cynthia Paul of Lynrock Lake, with a $2.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Greg Eisner’s Engineers Gate Manager and . In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Lantronix Inc (NASDAQ:LTRX), around 0.18% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.0042 percent of its 13F equity portfolio to LTRX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let’s now review hedge fund activity in other stocks similar to Lantronix Inc (NASDAQ:LTRX). These stocks are Ocean Bio-Chem, Inc. (NASDAQ:OBCI), XpresSpa Group, Inc. (NASDAQ:XSPA), PFSweb, Inc. (NASDAQ:PFSW), EDAP TMS S.A. (NASDAQ:EDAP), PCB Bancorp (NASDAQ:PCB), ESSA Bancorp, Inc. (NASDAQ:ESSA), and FVCBankcorp, Inc. (NASDAQ:FVCB). This group of stocks’ market values match LTRX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OBCI | 2 | 4284 | 1 |
| XSPA | 3 | 2502 | 0 |
| PFSW | 8 | 15762 | 1 |
| EDAP | 3 | 9159 | 0 |
| PCB | 4 | 14857 | 0 |
| ESSA | 3 | 8857 | 1 |
| FVCB | 3 | 3495 | -1 |
| Average | 3.7 | 8417 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $6 million in LTRX’s case. PFSweb, Inc. (NASDAQ:PFSW) is the most popular stock in this table. On the other hand Ocean Bio-Chem, Inc. (NASDAQ:OBCI) is the least popular one with only 2 bullish hedge fund positions. Lantronix Inc (NASDAQ:LTRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LTRX is 51.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately LTRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LTRX were disappointed as the stock returned -10.2% since the end of September (through 11/27) 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 many of these stocks already outperformed the market so far this year.
Follow Lantronix Inc (NASDAQ:LTRX)
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Disclosure: None. This article was originally published at Insider Monkey.
