In this article we will analyze whether Luther Burbank Corporation (NASDAQ:LBC) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Luther Burbank Corporation (NASDAQ:LBC) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 9. LBC has experienced an increase in hedge fund sentiment of late. There were 5 hedge funds in our database with LBC positions at the end of the fourth quarter. Our calculations also showed that LBC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 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 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.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the new hedge fund action regarding Luther Burbank Corporation (NASDAQ:LBC).
Do Hedge Funds Think LBC Is A Good Stock To Buy Now?
At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LBC over the last 23 quarters. So, let’s check out 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 Luther Burbank Corporation (NASDAQ:LBC), with a stake worth $4 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.6 million. Millennium Management, Citadel Investment Group, and Zebra 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 Zebra Capital Management allocated the biggest weight to Luther Burbank Corporation (NASDAQ:LBC), around 0.42% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to LBC.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Zebra Capital Management, managed by Roger Ibbotson, established the largest position in Luther Burbank Corporation (NASDAQ:LBC). Zebra Capital Management had $0.4 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.1 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks similar to Luther Burbank Corporation (NASDAQ:LBC). These stocks are Pulse Biosciences, Inc (NASDAQ:PLSE), Sohu.com Limited (NASDAQ:SOHU), Eastman Kodak Co. (NYSE:KODK), SOS Limited (NYSE:SOS), Farmers & Merchants Bancorp (NYSE:FMCB), Advent Technologies Holdings, Inc. (NASDAQ:ADN), and CEL-SCI Corporation (NYSE:CVM). This group of stocks’ market values are closest to LBC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLSE | 1 | 472 | -1 |
| SOHU | 13 | 89879 | -2 |
| KODK | 12 | 37092 | 0 |
| SOS | 6 | 2548 | 6 |
| FMCB | 2 | 1315 | 1 |
| ADN | 16 | 32750 | 16 |
| CVM | 5 | 20832 | -1 |
| Average | 7.9 | 26413 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $7 million in LBC’s case. Advent Technologies Holdings, Inc. (NASDAQ:ADN) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 1 bullish hedge fund positions. Luther Burbank Corporation (NASDAQ:LBC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LBC is 42.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately LBC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LBC investors were disappointed as the stock returned 2.6% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Luther Burbank Corp (NASDAQ:LBC)
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Disclosure: None. This article was originally published at Insider Monkey.
