Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Lee Enterprises, Incorporated (NYSE:LEE) the right pick for your portfolio? Investors who are in the know are indeed in an optimistic mood. The number of long hedge fund bets went up by 1 in recent months. 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 Pfenex Inc (NYSEMKT:PFNX), EndoChoice Holdings Inc (NYSE:GI), and Comtech Telecomm. Corp. (NASDAQ:CMTL) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading Lee Enterprises, Incorporated (NYSE:LEE)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, an 11% rise from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LEE over the last 5 quarters, which had rebounded since bottoming out at the end of Q1. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Edward A. Mule’s Silver Point Capital has the most valuable position in Lee Enterprises, Incorporated (NYSE:LEE), worth close to $4.4 million. On Silver Point Capital’s heels is Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, which holds a $1.8 million position. Some other members of the smart money that are bullish encompass Robert B. Gillam’s McKinley Capital Management, Adam Wright and Gary Kohler’s Blue Clay Capital, and Warren Buffett’s Berkshire Hathaway. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.
With general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. McKinley Capital Management initiated the largest position in Lee Enterprises, Incorporated (NYSE:LEE), having $1.4 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a small investment in the stock during the quarter. The only other fund with a brand new LEE position was Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Lee Enterprises, Incorporated (NYSE:LEE). We will take a look at Pfenex Inc (NYSEMKT:PFNX), EndoChoice Holdings Inc (NYSE:GI), Comtech Telecomm. Corp. (NASDAQ:CMTL), and Stemline Therapeutics Inc (NASDAQ:STML). This group of stocks’ market caps match LEE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFNX | 8 | 18999 | -1 |
| GI | 8 | 11746 | 1 |
| CMTL | 11 | 42520 | -6 |
| STML | 11 | 11468 | 3 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $9 million in LEE’s case. Comtech Telecomm. Corp. (NASDAQ:CMTL) is the most popular stock in this table. On the other hand Pfenex Inc (NYSEMKT:PFNX) is the least popular one with only 8 bullish hedge fund positions. Lee Enterprises, Incorporated (NYSE:LEE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on recently. In this regard STML might be a better candidate to consider taking a long position in.
Disclosure: None
