The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Limbach Holdings, Inc. (NASDAQ:LMB), and what that likely means for the prospects of the company and its stock.
Is Limbach Holdings, Inc. (NASDAQ:LMB) a buy right now? The smart money is getting less optimistic. The number of bullish hedge fund bets dropped by 2 lately. Our calculations also showed that LMB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). LMB was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with LMB holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
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We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a gander at the new hedge fund action encompassing Limbach Holdings, Inc. (NASDAQ:LMB).
What does smart money think about Limbach Holdings, Inc. (NASDAQ:LMB)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LMB over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Limbach Holdings, Inc. (NASDAQ:LMB) was held by Renaissance Technologies, which reported holding $0.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $0.2 million position. The only other hedge fund that is bullish on the company was Bailard Inc.
Judging by the fact that Limbach Holdings, Inc. (NASDAQ:LMB) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that slashed their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace cut the largest position of the 750 funds watched by Insider Monkey, comprising about $0.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Limbach Holdings, Inc. (NASDAQ:LMB). We will take a look at Quest Resource Holding Corp (NASDAQ:QRHC), Stein Mart, Inc. (NASDAQ:SMRT), Armata Pharmaceuticals, Inc. (NYSE:ARMP), and Global Self Storage, Inc. (NASDAQ:SELF). This group of stocks’ market caps match LMB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QRHC | 5 | 6742 | 1 |
| SMRT | 5 | 234 | 0 |
| ARMP | 1 | 280 | 0 |
| SELF | 2 | 234 | 0 |
| Average | 3.25 | 1873 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in LMB’s case. Quest Resource Holding Corp (NASDAQ:QRHC) is the most popular stock in this table. On the other hand Armata Pharmaceuticals, Inc. (NYSE:ARMP) is the least popular one with only 1 bullish hedge fund positions. Limbach Holdings, Inc. (NASDAQ:LMB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LMB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LMB investors were disappointed as the stock returned -39.1% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
