LendingClub Corp (NYSE:LC) shares are 3.37% lower this morning on the back of a Wall Street Journal article entitled ‘LendingClub Fund Falters‘, in which the authors noted that a fund that invests in LendingClub’s internet consumer loans returned only 0.12% for April, marking the second-smallest monthly gain in the fund’s history. The fund, which is also controlled by LendingClub, typically averages a monthly return of 0.60%. In addition, the fund disclosed that its loans were riskier than originally thought. If the funds that invest in LendingClub’s loans can’t achieve good risk-adjusted returns, the future of peer-to-peer lending/online lending may need additional innovation before it challenges the old guard on Wall Street like many investors have anticipated.
How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors (see the details here). With this in mind, let’s take a look at the recent hedge fund activity surrounding LendingClub Corp (NYSE:LC).
LendingClub Corp (NYSE:LC) has experienced an increase in enthusiasm from smart money lately. LC was in 23 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with LC positions at the end of 2015. At the end of this article we will also compare LC to other stocks including Allied World Assurance Co Holdings, AG. (NYSE:AWH), Autohome Inc (ADR) (NYSE:ATHM), and Healthcare Realty Trust Inc (NYSE:HR) to get a better sense of its popularity.
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According to Insider Monkey’s hedge fund database, David Gallo’s Valinor Management LLC has the number one position in LendingClub Corp (NYSE:LC), worth close to $147.5 million, amounting to 4.2% of its total 13F portfolio. The second most bullish fund manager is Jason Karp of Tourbillon Capital Partners, with a $47 million call position; the fund has 1% of its 13F portfolio invested in the position. Remaining members of the smart money that are bullish consist of Christopher James’ Partner Fund Management and Alexander Tamas’ VY Capital.
On the next page we’ll look at some funds that took up positions in Lending Club during Q1, as well as compare the stock to a handful of others with similar market caps.
As industrywide interest jumped in Q1, key money managers were driving this bullishness. Partner Fund Management initiated the biggest position in LendingClub Corp (NYSE:LC), having $40.8 million invested in the company at the end of the quarter. Christopher Lyle’s SCGE Management also initiated a $10.4 million position during the quarter. The following funds were also among the new LC investors: Glenn Russell Dubin’s Highbridge Capital Management, Jim Simons’ Renaissance Technologies, and Eric Semler’s TCS Capital Management.
Let’s go over hedge fund activity in other stocks similar to LendingClub Corp (NYSE:LC). We will take a look at Allied World Assurance Co Holdings, AG. (NYSE:AWH), Autohome Inc (ADR) (NYSE:ATHM), Healthcare Realty Trust Inc (NYSE:HR), and International Game Technology (NYSE:IGT). All of these stocks’ market caps resemble LC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWH | 14 | 230722 | -4 |
| ATHM | 11 | 69941 | -2 |
| HR | 6 | 47401 | -1 |
| IGT | 22 | 542123 | 2 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $359 million in LC’s case. International Game Technology (NYSE:IGT) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks LendingClub Corp (NYSE:LC) 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.
Disclosure: None
