Should I Avoid LINE Corporation (LN)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of LINE Corporation (NYSE:LN).

Is LINE Corporation (NYSE:LN) a safe investment now? Prominent investors were taking a pessimistic view. The number of long hedge fund positions shrunk by 4 in recent months. LINE Corporation (NYSE:LN) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. Our calculations also showed that LN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

In the eyes of most stock holders, hedge funds are seen as unimportant, old financial tools of years past. While there are greater than 8000 funds trading at present, Our researchers choose to focus on the moguls of this club, about 850 funds. It is estimated that this group of investors command the lion’s share of all hedge funds’ total asset base, and by shadowing their first-class picks, Insider Monkey has brought to light several investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the fresh hedge fund action encompassing LINE Corporation (NYSE:LN).

What does smart money think about LINE Corporation (NYSE:LN)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in LN a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Claes Fornell’s CSat Investment Advisory has the most valuable position in LINE Corporation (NYSE:LN), worth close to $3.3 million, accounting for 0.3% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $2.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Ken Griffin’s Citadel Investment Group, Steven Clark’s Omni Partners and . In terms of the portfolio weights assigned to each position CSat Investment Advisory allocated the biggest weight to LINE Corporation (NYSE:LN), around 0.3% of its 13F portfolio. Omni Partners is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to LN.

Seeing as LINE Corporation (NYSE:LN) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Lei Zhang’s Hillhouse Capital Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising close to $33.9 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $12.9 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to LINE Corporation (NYSE:LN). We will take a look at Trimble Inc. (NASDAQ:TRMB), Generac Holdings Inc. (NYSE:GNRC), Ceridian HCM Holding Inc. (NYSE:CDAY), Waters Corporation (NYSE:WAT), Jacobs Engineering Group Inc. (NYSE:J), Hewlett Packard Enterprise Company (NYSE:HPE), and The AES Corporation (NYSE:AES). All of these stocks’ market caps resemble LN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $961 million. That figure was $6 million in LN’s case. Generac Holdings Inc. (NYSE:GNRC) is the most popular stock in this table. On the other hand Jacobs Engineering Group Inc. (NYSE:J) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks LINE Corporation (NYSE:LN) is even less popular than J. Our overall hedge fund sentiment score for LN is 9.6. 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. Hedge funds dodged a bullet by taking a bearish stance towards LN. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately LN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LN investors were disappointed as the stock returned 2.1% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.

Disclosure: None. This article was originally published at Insider Monkey.