Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
LendingClub Corp (NYSE:LC) has experienced a decrease in support from the world’s most elite money managers recently. LC was in 7 hedge funds’ portfolios at the end of December. There were 9 hedge funds in our database with LC holdings at the end of the previous quarter. Our calculations also showed that LC isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the latest hedge fund action regarding LendingClub Corp (NYSE:LC).
How have hedgies been trading LendingClub Corp (NYSE:LC)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in LC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of LendingClub Corp (NYSE:LC), with a stake worth $1 million reported as of the end of December. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $0.8 million. Tiger Global Management LLC, Citadel Investment Group, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Because LendingClub Corp (NYSE:LC) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that elected to cut their full holdings heading into Q3. At the top of the heap, Israel Englander’s Millennium Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1.3 million in stock, and Will Graves’s Boardman Bay Capital Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LendingClub Corp (NYSE:LC) but similarly valued. These stocks are The Marcus Corporation (NYSE:MCS), City Holding Company (NASDAQ:CHCO), Southside Bancshares, Inc. (NASDAQ:SBSI), and Talend S.A. (NASDAQ:TLND). This group of stocks’ market values match LC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCS | 11 | 70912 | -2 |
| CHCO | 10 | 21926 | 2 |
| SBSI | 6 | 55613 | -3 |
| TLND | 27 | 333254 | 5 |
| Average | 13.5 | 120426 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $3 million in LC’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 6 bullish hedge fund positions. LendingClub Corp (NYSE:LC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on LC, though not to the same extent, as the stock returned 22.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
