We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like LegacyTexas Financial Group Inc (NASDAQ:LTXB).
LegacyTexas Financial Group Inc (NASDAQ:LTXB) was in 15 hedge funds’ portfolios at the end of June. LTXB has experienced an increase in hedge fund sentiment of late. There were 12 hedge funds in our database with LTXB positions at the end of the previous quarter. Our calculations also showed that LTXB isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the recent hedge fund action regarding LegacyTexas Financial Group Inc (NASDAQ:LTXB).
How are hedge funds trading LegacyTexas Financial Group Inc (NASDAQ:LTXB)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LTXB over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Magnetar Capital held the most valuable stake in LegacyTexas Financial Group Inc (NASDAQ:LTXB), which was worth $35.6 million at the end of the second quarter. On the second spot was Water Island Capital which amassed $8.2 million worth of shares. Moreover, D E Shaw, Tudor Investment Corp, and Renaissance Technologies were also bullish on LegacyTexas Financial Group Inc (NASDAQ:LTXB), allocating a large percentage of their portfolios to this stock.
Now, key money managers were leading the bulls’ herd. Magnetar Capital, managed by Alec Litowitz and Ross Laser, assembled the most valuable position in LegacyTexas Financial Group Inc (NASDAQ:LTXB). Magnetar Capital had $35.6 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $8.2 million investment in the stock during the quarter. The other funds with brand new LTXB positions are Paul Tudor Jones’s Tudor Investment Corp, Gregg Moskowitz’s Interval Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks similar to LegacyTexas Financial Group Inc (NASDAQ:LTXB). These stocks are Acacia Communications, Inc. (NASDAQ:ACIA), Senior Housing Properties Trust (NASDAQ:SNH), Ladder Capital Corp (NYSE:LADR), and Tenet Healthcare Corporation (NYSE:THC). This group of stocks’ market values are similar to LTXB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACIA | 28 | 295932 | -3 |
| SNH | 13 | 22338 | -4 |
| LADR | 13 | 33091 | -2 |
| THC | 30 | 669380 | 6 |
| Average | 21 | 255185 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $67 million in LTXB’s case. Tenet Healthcare Corporation (NYSE:THC) is the most popular stock in this table. On the other hand Senior Housing Properties Trust (NASDAQ:SNH) is the least popular one with only 13 bullish hedge fund positions. LegacyTexas Financial Group Inc (NASDAQ:LTXB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on LTXB as the stock returned 7.6% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
