Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) and see how the stock is affected by the recent hedge fund activity.
Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) was in 9 hedge funds’ portfolios at the end of September. LOMA investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. There were 14 hedge funds in our database with LOMA positions at the end of the previous quarter. Our calculations also showed that LOMA 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.
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’ 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James Dondero of Highland Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s go over the new hedge fund action encompassing Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA).
Hedge fund activity in Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the second quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in LOMA 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.
Among these funds, International Value Advisers held the most valuable stake in Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA), which was worth $12.2 million at the end of the third quarter. On the second spot was Marathon Asset Management which amassed $4.2 million worth of shares. Highland Capital Management, Oaktree Capital Management, and D E Shaw 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 Marathon Asset Management allocated the biggest weight to Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA), around 1.88% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, dishing out 0.45 percent of its 13F equity portfolio to LOMA.
Judging by the fact that Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes heading into Q4. Interestingly, Edmond M. Safra’s EMS Capital cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $4.3 million in stock. Jody LaNasa’s fund, Serengeti Asset Management, also dumped its stock, about $2.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) but similarly valued. We will take a look at First Foundation Inc (NASDAQ:FFWM), Impinj, Inc. (NASDAQ:PI), Byline Bancorp, Inc. (NYSE:BY), and P.H. Glatfelter Company (NYSE:GLT). This group of stocks’ market caps are similar to LOMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FFWM | 12 | 72231 | 2 |
| PI | 15 | 213268 | -2 |
| BY | 5 | 20148 | 0 |
| GLT | 9 | 15614 | 3 |
| Average | 10.25 | 80315 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $21 million in LOMA’s case. Impinj, Inc. (NASDAQ:PI) is the most popular stock in this table. On the other hand Byline Bancorp, Inc. (NYSE:BY) is the least popular one with only 5 bullish hedge fund positions. Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on LOMA as the stock returned 14.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
