Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Lumentum Holdings Inc (NASDAQ:LITE).
Is Lumentum Holdings Inc (NASDAQ:LITE) a healthy stock for your portfolio? Investors who are in the know are surely betting on the stock. The number of long hedge fund investments grew by 3 lately. LITE was in 28 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with LITE holdings at the end of the previous quarter. At the end of this article we will also compare LITE to other stocks including Lexmark International Inc (NYSE:LXK), Fulton Financial Corp (NASDAQ:FULT), and Versum Materials Inc (NYSE:VSM) to get a better sense of its popularity.
Follow Lumentum Holdings Inc. (NASDAQ:LITE)
Follow Lumentum Holdings Inc. (NASDAQ:LITE)
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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What does the smart money think about Lumentum Holdings Inc (NASDAQ:LITE)?
Heading into the fourth quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 12% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in LITE heading into this year. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the number one position in Lumentum Holdings Inc (NASDAQ:LITE), worth close to $22.4 million. The second most bullish fund manager is Kingdon Capital, led by Mark Kingdon, holding a $15.4 million position. Remaining professional money managers that hold long positions include Richard Driehaus’ Driehaus Capital, Clint Carlson’s Carlson Capital and Ken Hahn’s Quentec Asset Management. 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.
As aggregate interest increased, specific money managers were breaking ground themselves. Carlson Capital established the most valuable position in Lumentum Holdings Inc (NASDAQ:LITE). Carlson Capital had $12.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $9 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Clough’s Clough Capital Partners, Ken Griffin’s Citadel Investment Group, and David Harding’s Winton Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lumentum Holdings Inc (NASDAQ:LITE) but similarly valued. These stocks are Lexmark International Inc (NYSE:LXK), Fulton Financial Corp (NASDAQ:FULT), Versum Materials Inc (NYSE:VSM), and FireEye Inc (NASDAQ:FEYE). This group of stocks’ market caps are closest to LITE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LXK | 25 | 303638 | -3 |
| FULT | 10 | 37219 | 2 |
| VSM | 16 | 71843 | 16 |
| FEYE | 29 | 284327 | 2 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $148 million in LITE’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 10 bullish hedge fund positions. Lumentum Holdings Inc (NASDAQ:LITE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FEYE might be a better candidate to consider taking a long position in.
Disclosure: None
