Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Lincoln Electric Holdings, Inc. (NASDAQ:LECO) .
Is Lincoln Electric Holdings, Inc. (NASDAQ:LECO) the right investment to pursue these days? Hedge funds are actually turning less bullish. The number of long hedge fund investments decreased by 1 recently. There were 18 hedge funds in our database with LECO positions at the end of the previous quarter. At the end of this article we will also compare LECO to other stocks including Juno Therapeutics Inc (NASDAQ:JUNO), Graphic Packaging Holding Company (NYSE:GPK), and Eaton Vance Corp (NYSE:EV) to get a better sense of its popularity.
Follow Lincoln Electric Holdings Inc (NASDAQ:LECO)
Follow Lincoln Electric Holdings Inc (NASDAQ:LECO)
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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With all of this in mind, we’re going to take a glance at the key action regarding Lincoln Electric Holdings, Inc. (NASDAQ:LECO).
How are hedge funds trading Lincoln Electric Holdings, Inc. (NASDAQ:LECO)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2016. By comparison, 15 hedge funds held shares or bullish call options in LECO heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in Lincoln Electric Holdings, Inc. (NASDAQ:LECO). Royce & Associates has a $99.5 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, led by Ken Fisher, holding a $65.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and Mario Gabelli’s GAMCO Investors. 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.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. It’s worth mentioning that Clint Murray’s Lodge Hill Capital cut the largest stake of all the investors followed by Insider Monkey, totaling about $18.9 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also cut its stock, about $1.5 million worth.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lincoln Electric Holdings, Inc. (NASDAQ:LECO) but similarly valued. We will take a look at Juno Therapeutics Inc (NASDAQ:JUNO), Graphic Packaging Holding Company (NYSE:GPK), Eaton Vance Corp (NYSE:EV), and Retail Properties of America Inc (NYSE:RPAI). This group of stocks’ market values are closest to LECO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JUNO | 16 | 82556 | 5 |
| GPK | 32 | 936168 | -4 |
| EV | 9 | 15421 | -1 |
| RPAI | 14 | 234056 | -5 |
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $233 million in LECO’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand Eaton Vance Corp (NYSE:EV) is the least popular one with only 9 bullish hedge fund positions. Lincoln Electric Holdings, Inc. (NASDAQ:LECO) 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. In this regard GPK might be a better candidate to consider taking a long position in.
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Disclosure: None
