It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Lifevantage Corporation (NASDAQ:LFVN).
Is Lifevantage Corporation (NASDAQ:LFVN) a good investment right now? Prominent investors are in a bullish mood. The number of long hedge fund positions moved up by 1 recently. Our calculations also showed that LFVN 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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
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 review the latest hedge fund action regarding Lifevantage Corporation (NASDAQ:LFVN).
Hedge fund activity in Lifevantage Corporation (NASDAQ:LFVN)
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in LFVN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Lifevantage Corporation (NASDAQ:LFVN), with a stake worth $15.3 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $2.4 million. Two Sigma Advisors, Winton Capital Management, and AQR Capital Management 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 Renaissance Technologies allocated the biggest weight to Lifevantage Corporation (NASDAQ:LFVN), around 0.01% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to LFVN.
Now, key hedge funds have been driving this bullishness. AQR Capital Management, managed by Cliff Asness, established the most valuable position in Lifevantage Corporation (NASDAQ:LFVN). AQR Capital Management had $0.2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lifevantage Corporation (NASDAQ:LFVN) but similarly valued. These stocks are Bank7 Corp. (NASDAQ:BSVN), EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT), KVH Industries, Inc. (NASDAQ:KVHI), and Fulgent Genetics, Inc. (NASDAQ:FLGT). This group of stocks’ market values resemble LFVN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSVN | 3 | 11658 | 0 |
| EYPT | 4 | 1227 | 0 |
| KVHI | 5 | 14257 | 2 |
| FLGT | 5 | 4358 | 2 |
| Average | 4.25 | 7875 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $19 million in LFVN’s case. KVH Industries, Inc. (NASDAQ:KVHI) is the most popular stock in this table. On the other hand Bank7 Corp. (NASDAQ:BSVN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Lifevantage Corporation (NASDAQ:LFVN) 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. Hedge funds were also right about betting on LFVN, though not to the same extent, as the stock returned 10% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
