Is Lennox International Inc. (LII) Going to Burn These Hedge Funds?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Lennox International Inc. (NYSE:LII)? The smart money sentiment can provide an answer to this question.

Hedge fund interest in Lennox International Inc. (NYSE:LII) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LII isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare LII to other stocks including Formula One Group (NASDAQ:FWONA), Gaming and Leisure Properties Inc (NASDAQ:GLPI), and Weibo Corp (NASDAQ:WB) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the key hedge fund action regarding Lennox International Inc. (NYSE:LII).

Ken Griffin of Citadel Investment Group

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

At the end of September, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in LII a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Lennox International Inc. (NYSE:LII) was held by Impax Asset Management, which reported holding $146.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $78.6 million position. Other investors bullish on the company included Renaissance Technologies, Balyasny Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Lennox International Inc. (NYSE:LII), around 1.31% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, designating 0.67 percent of its 13F equity portfolio to LII.

Because Lennox International Inc. (NYSE:LII) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there were a few hedgies who sold off their entire stakes in the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, totaling close to $39.6 million in stock. Andrew Sandler’s fund, Sandler Capital Management, also dropped its stock, about $25.9 million worth. These transactions are intriguing to say the least, as total 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 Lennox International Inc. (NYSE:LII) but similarly valued. We will take a look at Formula One Group (NASDAQ:FWONA), Gaming and Leisure Properties Inc (NASDAQ:GLPI), Weibo Corp (NASDAQ:WB), Five9 Inc (NASDAQ:FIVN), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Comerica Incorporated (NYSE:CMA), and Marathon Oil Corporation (NYSE:MRO). This group of stocks’ market valuations are closest to LII’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $884 million. That figure was $492 million in LII’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 12 bullish hedge fund positions. Lennox International Inc. (NYSE:LII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LII is 38.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on LII as the stock returned 11.5% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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