While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Luther Burbank Corporation (NASDAQ:LBC).
Luther Burbank Corporation (NASDAQ:LBC) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. LBC investors should be aware of an increase in hedge fund interest recently. There were 2 hedge funds in our database with LBC positions at the end of the second quarter. Our calculations also showed that LBC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Luther Burbank Corporation (NASDAQ:LBC).
How have hedgies been trading Luther Burbank Corporation (NASDAQ:LBC)?
At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LBC over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Luther Burbank Corporation (NASDAQ:LBC), worth close to $2 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Luther Burbank Corporation (NASDAQ:LBC), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.002 percent of its 13F equity portfolio to LBC.
Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Luther Burbank Corporation (NASDAQ:LBC). Arrowstreet Capital had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.1 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks similar to Luther Burbank Corporation (NASDAQ:LBC). These stocks are Boston Omaha Corporation (NASDAQ:BOMN), Catchmark Timber Trust Inc (NYSE:CTT), Aegion Corp (NASDAQ:AEGN), Mercer International Inc. (NASDAQ:MERC), Altimmune, Inc. (NASDAQ:ALT), Cambium Networks Corporation (NASDAQ:CMBM), and Byline Bancorp, Inc. (NYSE:BY). This group of stocks’ market values resemble LBC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOMN | 5 | 166210 | -7 |
| CTT | 13 | 53862 | 4 |
| AEGN | 9 | 13719 | -1 |
| MERC | 13 | 82614 | 3 |
| ALT | 18 | 144736 | 6 |
| CMBM | 6 | 4612 | 4 |
| BY | 7 | 8582 | -1 |
| Average | 10.1 | 67762 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $3 million in LBC’s case. Altimmune, Inc. (NASDAQ:ALT) is the most popular stock in this table. On the other hand Boston Omaha Corporation (NASDAQ:BOMN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Luther Burbank Corporation (NASDAQ:LBC) is even less popular than BOMN. Our overall hedge fund sentiment score for LBC is 20.3. 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. Hedge funds clearly dropped the ball on LBC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on LBC as the stock returned 23.7% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow Luther Burbank Corp (NASDAQ:LBC)
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Disclosure: None. This article was originally published at Insider Monkey.
