Is Libbey Inc. (LBY) Going to Burn These Hedge Funds?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Libbey Inc. (NYSEMKT:LBY) .

Libbey Inc. (NYSEMKT:LBY) investors should pay attention to a decrease in enthusiasm from smart money lately. There were 11 hedge funds in our database with LBY holdings 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 Kimball Electronics Inc (NASDAQ:KE), Cross Country Healthcare, Inc. (NASDAQ:CCRN), and Cowen Group, Inc. (NASDAQ:COWN) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, let’s go over the new action surrounding Libbey Inc. (NYSEMKT:LBY).

How are hedge funds trading Libbey Inc. (NYSEMKT:LBY)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LBY over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Spitfire Capital, led by Julian Allen, holds the most valuable position in Libbey Inc. (NYSEMKT:LBY). Spitfire Capital has a $13.2 million position in the stock, comprising 5.9% of its 13F portfolio. The second most bullish fund manager is D E Shaw, one of the biggest hedge funds in the world, holding a $7.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Peter Schliemann’s Rutabaga Capital Management, Jim Simons’ Renaissance Technologies and Cliff Asness’ AQR Capital Management. 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-microcap stocks.

Because Libbey Inc. (NYSEMKT:LBY) has sustained falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Craig A. Drill’s Craig Drill Capital dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at about $6.8 million in stock. Jonathan Lennon’s fund, Pleasant Lake Partners, also dumped its stock, about $2.1 million worth.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Libbey Inc. (NYSEMKT:LBY) but similarly valued. We will take a look at Kimball Electronics Inc (NASDAQ:KE), Cross Country Healthcare, Inc. (NASDAQ:CCRN), Cowen Group, Inc. (NASDAQ:COWN), and Guaranty Bancorp (NASDAQ:GBNK). This group of stocks’ market values are similar to LBY’s market value.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $50 million in LBY’s case. Cross Country Healthcare, Inc. (NASDAQ:CCRN) is the most popular stock in this table. On the other hand Kimball Electronics Inc (NASDAQ:KE) is the least popular one with only 9 bullish hedge fund positions. Libbey Inc. (NYSEMKT:LBY) 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. In this regard CCRN might be a better candidate to consider taking a long position in.

Disclosure: None