It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Libbey Inc. (NYSE:LBY).
Is Libbey Inc. (NYSE:LBY) undervalued? Investors who are in the know are betting on the stock. The number of long hedge fund positions advanced by 2 recently. Our calculations also showed that LBY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the fresh hedge fund action encompassing Libbey Inc. (NYSE:LBY).
How have hedgies been trading Libbey Inc. (NYSE:LBY)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in LBY a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Brigade Capital held the most valuable stake in Libbey Inc. (NYSE:LBY), which was worth $5.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $2.5 million worth of shares. Renaissance Technologies, D E Shaw, and Harvey Partners 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 Harvey Partners allocated the biggest weight to Libbey Inc. (NYSE:LBY), around 0.67% of its 13F portfolio. Brigade Capital is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to LBY.
As one would reasonably expect, key money managers were breaking ground themselves. Harvey Partners, managed by Jeffrey Moskowitz, established the most valuable position in Libbey Inc. (NYSE:LBY). Harvey Partners had $0.9 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.1 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Libbey Inc. (NYSE:LBY). We will take a look at AgeX Therapeutics, Inc. (NASDAQ:AGE), Highpower International Inc (NASDAQ:HPJ), Hexindai Inc. (NASDAQ:HX), and Curis, Inc. (NASDAQ:CRIS). All of these stocks’ market caps resemble LBY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGE | 1 | 5874 | 0 |
| HPJ | 1 | 5594 | 0 |
| HX | 3 | 1565 | -1 |
| CRIS | 4 | 12581 | 1 |
| Average | 2.25 | 6404 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $13 million in LBY’s case. Curis, Inc. (NASDAQ:CRIS) is the most popular stock in this table. On the other hand AgeX Therapeutics, Inc. (NASDAQ:AGE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Libbey Inc. (NYSE:LBY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LBY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LBY were disappointed as the stock returned -48.4% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.