Is LRCX Stock A Buy or Sell?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Lam Research Corporation (NASDAQ:LRCX).

Is LRCX stock a buy or sell? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund positions improved by 1 recently. Lam Research Corporation (NASDAQ:LRCX) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. Our calculations also showed that LRCX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 55 hedge funds in our database with LRCX positions at the end of the third quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Philippe Laffont of Coatue Management

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

At Q4’s end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the third quarter of 2020. By comparison, 52 hedge funds held shares or bullish call options in LRCX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Lam Research Corporation (NASDAQ:LRCX) was held by Fisher Asset Management, which reported holding $452.2 million worth of stock at the end of December. It was followed by Coatue Management with a $449.7 million position. Other investors bullish on the company included Alkeon Capital Management, Maverick Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Lam Research Corporation (NASDAQ:LRCX), around 17.02% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 8.12 percent of its 13F equity portfolio to LRCX.

Consequently, specific money managers were leading the bulls’ herd. Moore Global Investments, managed by Louis Bacon, established the most outsized position in Lam Research Corporation (NASDAQ:LRCX). Moore Global Investments had $12.6 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also made a $8 million investment in the stock during the quarter. The following funds were also among the new LRCX investors: Mark R. Freeman’s Socorro Asset Management, Tor Minesuk’s Mondrian Capital, and Qing Li’s Sciencast Management.

Let’s now review hedge fund activity in other stocks similar to Lam Research Corporation (NASDAQ:LRCX). These stocks are Duke Energy Corporation (NYSE:DUK), Autodesk, Inc. (NASDAQ:ADSK), The Sherwin-Williams Company (NYSE:SHW), The Bank of Nova Scotia (NYSE:BNS), CME Group Inc (NASDAQ:CME), NetEase, Inc (NASDAQ:NTES), and The Southern Company (NYSE:SO). This group of stocks’ market caps are closest to LRCX’s market cap.

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As you can see these stocks had an average of 42.9 hedge funds with bullish positions and the average amount invested in these stocks was $1786 million. That figure was $2620 million in LRCX’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 19 bullish hedge fund positions. Lam Research Corporation (NASDAQ:LRCX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LRCX is 72.5. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LRCX as the stock returned 15.1% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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