Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Lear Corporation (NYSE:LEA) based on that data.
Is LEA a good stock to buy now? Lear Corporation (NYSE:LEA) was in 44 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. LEA investors should pay attention to an increase in hedge fund interest recently. There were 41 hedge funds in our database with LEA holdings at the end of June. Our calculations also showed that LEA 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).
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.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a gander at the fresh hedge fund action surrounding Lear Corporation (NYSE:LEA).
Do Hedge Funds Think LEA Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LEA over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Lear Corporation (NYSE:LEA), with a stake worth $531.8 million reported as of the end of September. Trailing Pzena Investment Management was Paradice Investment Management, which amassed a stake valued at $64.4 million. Greenhaven Associates, Balyasny Asset Management, and Citadel Investment Group were 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 BlueDrive Global Investors allocated the biggest weight to Lear Corporation (NYSE:LEA), around 6.93% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, earmarking 6.6 percent of its 13F equity portfolio to LEA.
Now, specific money managers were breaking ground themselves. BlueDrive Global Investors, managed by Oscar Hattink, assembled the most valuable position in Lear Corporation (NYSE:LEA). BlueDrive Global Investors had $27.1 million invested in the company at the end of the quarter. Clint Murray’s Lodge Hill Capital also initiated a $7.6 million position during the quarter. The other funds with new positions in the stock are Robert Vincent McHugh’s Jade Capital Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks similar to Lear Corporation (NYSE:LEA). We will take a look at JOYY Inc. (NASDAQ:YY), Reliance Steel & Aluminum Co. (NYSE:RS), Interpublic Group of Companies Inc (NYSE:IPG), PRA Health Sciences Inc (NASDAQ:PRAH), Reinsurance Group of America Inc (NYSE:RGA), Encompass Health Corporation (NYSE:EHC), and Churchill Downs Incorporated (NASDAQ:CHDN). All of these stocks’ market caps are similar to LEA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YY | 31 | 536084 | 3 |
| RS | 30 | 267133 | 3 |
| IPG | 31 | 486054 | 9 |
| PRAH | 24 | 168019 | -9 |
| RGA | 31 | 258499 | -2 |
| EHC | 32 | 612130 | -1 |
| CHDN | 28 | 511671 | 3 |
| Average | 29.6 | 405656 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $975 million in LEA’s case. Encompass Health Corporation (NYSE:EHC) is the most popular stock in this table. On the other hand PRA Health Sciences Inc (NASDAQ:PRAH) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Lear Corporation (NYSE:LEA) is more popular among hedge funds. Our overall hedge fund sentiment score for LEA is 88. 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. 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 returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on LEA as the stock returned 45.3% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
