“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards LPL Financial Holdings Inc (NASDAQ:LPLA).
LPL Financial Holdings Inc (NASDAQ:LPLA) was in 35 hedge funds’ portfolios at the end of September. LPLA has seen an increase in enthusiasm from smart money in recent months. There were 32 hedge funds in our database with LPLA positions at the end of the previous quarter. Our calculations also showed that lpla isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action surrounding LPL Financial Holdings Inc (NASDAQ:LPLA).
Hedge fund activity in LPL Financial Holdings Inc (NASDAQ:LPLA)
Heading into the fourth quarter of 2018, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LPLA over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in LPL Financial Holdings Inc (NASDAQ:LPLA) was held by First Pacific Advisors LLC, which reported holding $223.7 million worth of stock at the end of September. It was followed by Southpoint Capital Advisors with a $154.8 million position. Other investors bullish on the company included Samlyn Capital, Balyasny Asset Management, and D E Shaw.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in LPL Financial Holdings Inc (NASDAQ:LPLA). Citadel Investment Group had $7.2 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz’s Interval Partners, Mike Vranos’s Ellington, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to LPL Financial Holdings Inc (NASDAQ:LPLA). These stocks are PBF Energy Inc (NYSE:PBF), Ceridian HCM Holding Inc. (NYSE:CDAY), DCP Midstream LP (NYSE:DCP), and GrafTech International Ltd. (NYSE:EAF). This group of stocks’ market valuations are closest to LPLA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBF | 29 | 478566 | 4 |
| CDAY | 18 | 344935 | -2 |
| DCP | 5 | 17689 | 0 |
| EAF | 31 | 350715 | 12 |
| Average | 20.75 | 297976 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $1.11 billion in LPLA’s case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks LPL Financial Holdings Inc (NASDAQ:LPLA) 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. This article was originally published at Insider Monkey.
