Lear Corporation (LEA): Are Hedge Funds Right About This Stock?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Lear Corporation (NYSE:LEA) in this article.

Is Lear Corporation the right pick for your portfolio? Prominent investors are buying. The number of long hedge fund positions moved up by 3 in recent months. 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 International Flavors & Fragrances Inc (NYSE:IFF), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and Pembina Pipeline Corp (NYSE:PBA) to gather more data points.

To most stock holders, hedge funds are assumed to be worthless, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, We look at the moguls of this group, approximately 700 funds. It is estimated that this group of investors oversee the lion’s share of all hedge funds’ total capital, and by shadowing their unrivaled equity investments, Insider Monkey has found a number of investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to take a look at the recent action surrounding Lear Corporation (NYSE:LEA).

What have hedge funds been doing with Lear Corporation (NYSE:LEA)?

Heading into Q4, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the number one position in Lear Corporation (NYSE:LEA), worth close to $211.9 million, accounting for 0.2% of its total 13F portfolio. On Citadel Investment Group’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $116 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Robert Polak’s Anchor Bolt Capital, Dmitry Balyasny’s Balyasny Asset Management and Alexander Mitchell’s Scopus Asset Management.

Consequently, specific money managers have been driving this bullishness. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, initiated the most valuable position in Lear Corporation (NYSE:LEA). Blue Mountain Capital had $42.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $10.9 million position during the quarter. The other funds with brand new LEA positions are Noam Gottesman’s GLG Partners, Neil Chriss’ Hutchin Hill Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lear Corporation (NYSE:LEA) but similarly valued. We will take a look at International Flavors & Fragrances Inc (NYSE:IFF), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Pembina Pipeline Corp (NYSE:PBA), and F5 Networks, Inc. (NASDAQ:FFIV). This group of stocks’ market values are similar to LEA’s market value.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $299 million, below the $872 million figure in LEA’s case. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is the most popular stock in this table with 32 funds reporting stakes. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one. Compared to these stocks Lear Corporation (NYSE:LEA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.