Is LEA Stock A Buy or Sell?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Lear Corporation (NYSE:LEA).

Is LEA stock a buy? Lear Corporation (NYSE:LEA) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Lear Corporation (NYSE:LEA) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 44. There were 44 hedge funds in our database with LEA holdings at the end of September. Our calculations also showed that LEA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. Keeping this in mind we’re going to review the recent hedge fund action regarding Lear Corporation (NYSE:LEA).

Do Hedge Funds Think LEA Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in LEA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Lear Corporation (NYSE:LEA) was held by Pzena Investment Management, which reported holding $732.7 million worth of stock at the end of December. It was followed by Balyasny Asset Management with a $114.3 million position. Other investors bullish on the company included Paradice Investment Management, Greenhaven Associates, and Atlantic Investment Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Lear Corporation (NYSE:LEA), around 9.29% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, setting aside 5.26 percent of its 13F equity portfolio to LEA.

Seeing as Lear Corporation (NYSE:LEA) has experienced falling interest from the smart money, it’s easy to see that there exists a select few hedgies who were dropping their positions entirely by the end of the fourth quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $40.3 million in stock. Oscar Hattink’s fund, BlueDrive Global Investors, also dropped its stock, about $27.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds by the end of the fourth quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lear Corporation (NYSE:LEA) but similarly valued. These stocks are Henry Schein, Inc. (NASDAQ:HSIC), GFL Environmental Inc. (NYSE:GFL), MGM Growth Properties LLC (NYSE:MGP), Kingsoft Cloud Holdings Limited (NASDAQ:KC), American Homes 4 Rent (NYSE:AMH), Magellan Midstream Partners, L.P. (NYSE:MMP), and BorgWarner Inc. (NYSE:BWA). All of these stocks’ market caps resemble LEA’s market cap.

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As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $1209 million in LEA’s case. Henry Schein, Inc. (NASDAQ:HSIC) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 18 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 71.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on LEA as the stock returned 13.4% since the end of December (through 4/1) 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.

Disclosure: None. This article was originally published at Insider Monkey.

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