Is Lululemon (LULU) Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Lululemon Athletica inc. (NASDAQ:LULU), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is LULU stock a buy or sell? Hedge fund interest in Lululemon Athletica inc. (NASDAQ:LULU) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LULU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). 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 DoorDash, Inc. (NYSE:DASH), Capital One Financial Corp. (NYSE:COF), and Roper Technologies Inc. (NYSE:ROP) to gather more data points.

Peter Rathjens of Arrowstreet Capital

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

At fourth quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in LULU a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of Lululemon Athletica inc. (NASDAQ:LULU), with a stake worth $237.8 million reported as of the end of December. Trailing D E Shaw was Broad Peak Investment Holdings, which amassed a stake valued at $82.9 million. Sylebra Capital Management, AQR Capital Management, and Zevenbergen Capital Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Broad Peak Investment Holdings allocated the biggest weight to Lululemon Athletica inc. (NASDAQ:LULU), around 4.95% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, designating 3.27 percent of its 13F equity portfolio to LULU.

Because Lululemon Athletica inc. (NASDAQ:LULU) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds who sold off their positions entirely by the end of the fourth quarter. Intriguingly, Robert Pohly’s Samlyn Capital dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at an estimated $136 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $105.6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Lululemon Athletica inc. (NASDAQ:LULU). We will take a look at DoorDash, Inc. (NYSE:DASH), Capital One Financial Corp. (NYSE:COF), Roper Technologies Inc. (NYSE:ROP), Keurig Dr Pepper Inc. (NASDAQ:KDP), The Blackstone Group Inc. (NYSE:BX), NXP Semiconductors NV (NASDAQ:NXPI), and Peloton Interactive, Inc. (NASDAQ:PTON). This group of stocks’ market caps are closest to LULU’s market cap.

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As you can see these stocks had an average of 49.4 hedge funds with bullish positions and the average amount invested in these stocks was $2683 million. That figure was $929 million in LULU’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Keurig Dr Pepper Inc. (NASDAQ:KDP) is the least popular one with only 29 bullish hedge fund positions. Lululemon Athletica inc. (NASDAQ:LULU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LULU is 62.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 0.8 percentage points. Unfortunately LULU wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on LULU were disappointed as the stock returned -11.3% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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