Is LII Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Lennox International Inc. (NYSE:LII) changed recently.

Is LII stock a buy? Lennox International Inc. (NYSE:LII) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Lennox International Inc. (NYSE:LII) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 34. There were 34 hedge funds in our database with LII holdings at the end of September. Our calculations also showed that LII isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Lennox International Inc. (NYSE:LII).

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

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LII over the last 22 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in Lennox International Inc. (NYSE:LII) was held by Impax Asset Management, which reported holding $106.2 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $48.7 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and GLG Partners. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Lennox International Inc. (NYSE:LII), around 3.75% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to LII.

Due to the fact that Lennox International Inc. (NYSE:LII) has faced bearish sentiment from the smart money, we can see that there was a specific group of money managers who were dropping their positions entirely last quarter. Interestingly, Brad Farber’s Atika Capital dropped the largest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $6.5 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund said goodbye to about $2.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Lennox International Inc. (NYSE:LII). We will take a look at Repligen Corporation (NASDAQ:RGEN), First Solar, Inc. (NASDAQ:FSLR), Bright Horizons Family Solutions Inc (NYSE:BFAM), Westlake Chemical Corporation (NYSE:WLK), L Brands Inc (NYSE:LB), Host Hotels and Resorts Inc (NASDAQ:HST), and Banco de Chile (NYSE:BCH). This group of stocks’ market caps match LII’s market cap.

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As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $898 million. That figure was $353 million in LII’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 3 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 46.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on LII as the stock returned 22.9% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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