Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze LendingClub Corp (NYSE:LC) from the perspective of those elite funds.
LendingClub Corp (NYSE:LC) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of September. 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 Government Properties Income Trust (NYSE:GOV), Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), and KLX Inc (NASDAQ:KLXI) to gather more data points.
Follow Lendingclub Corp (NYSE:LC)
Follow Lendingclub Corp (NYSE:LC)
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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What does the smart money think about LendingClub Corp (NYSE:LC)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. That follows a stretch in which hedge fund ownership rose by over 50% in three quarters, so the stock may have finally run out of new investors to attract. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Balyasny Asset Management, managed by Dmitry Balyasny, holds the number one position in LendingClub Corp (NYSE:LC). Balyasny Asset Management has a $42.1 million position in the stock. The second most bullish fund manager is Alexander Tamas of VY Capital, with a $27.8 million position; the fund has 39.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Eduardo Costa’s Calixto Global Investors, Peter S. Park’s Park West Asset Management and John Burbank’s Passport Capital.
Seeing as LendingClub Corp (NYSE:LC) has experienced flat sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their full holdings last quarter. Intriguingly, Glen Kacher’s Light Street Capital said goodbye to the biggest position of the 700 funds monitored by Insider Monkey, comprising about $17 million in stock, and Jerome L. Simon’s Lonestar Capital Management was right behind this move, as the fund dropped about $7.3 million worth of shares. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as LendingClub Corp (NYSE:LC) but similarly valued. These stocks are Government Properties Income Trust (NYSE:GOV), Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), KLX Inc (NASDAQ:KLXI), and Coeur d’Alene Mines Corporation (NYSE:CDE). This group of stocks’ market valuations resemble LC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOV | 6 | 89783 | 0 |
| LTRPA | 25 | 478942 | -3 |
| KLXI | 22 | 422767 | -1 |
| CDE | 26 | 286956 | 5 |
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $238 million in LC’s case. Coeur d’Alene Mines Corporation (NYSE:CDE) is the most popular stock in this table. On the other hand Government Properties Income Trust (NYSE:GOV) is the least popular one with only 6 bullish hedge fund positions. LendingClub Corp (NYSE:LC) 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 CDE might be a better candidate to consider for a long position.
Disclosure: None
