Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Lithium Americas Corp. (NYSE:LAC) based on that data.
Lithium Americas Corp. (NYSE:LAC) investors should be aware of a decrease in hedge fund interest lately. LAC was in 3 hedge funds’ portfolios at the end of March. There were 4 hedge funds in our database with LAC holdings at the end of the previous quarter. Our calculations also showed that LAC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding Lithium Americas Corp. (NYSE:LAC).
How have hedgies been trading Lithium Americas Corp. (NYSE:LAC)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in LAC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Lithium Americas Corp. (NYSE:LAC), with a stake worth $0.9 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $0.1 million. Millennium Management was 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 Lithium Americas Corp. (NYSE:LAC), around 0.0009% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.0002 percent of its 13F equity portfolio to LAC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Pinz Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified LAC as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks similar to Lithium Americas Corp. (NYSE:LAC). We will take a look at Zix Corporation (NASDAQ:ZIXI), PolyMet Mining Corp. (NYSE:PLM), Southern National Banc. of Virginia, Inc (NASDAQ:SONA), and PCSB Financial Corporation (NASDAQ:PCSB). This group of stocks’ market values match LAC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZIXI | 15 | 32028 | -1 |
| PLM | 3 | 395 | 1 |
| SONA | 10 | 13333 | 1 |
| PCSB | 10 | 18293 | -1 |
| Average | 9.5 | 16012 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $1 million in LAC’s case. Zix Corporation (NASDAQ:ZIXI) is the most popular stock in this table. On the other hand PolyMet Mining Corp. (NYSE:PLM) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Lithium Americas Corp. (NYSE:LAC) is even less popular than PLM. Hedge funds clearly dropped the ball on LAC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on LAC as the stock returned 50% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.