We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Life Storage, Inc. (NYSE:LSI).
Life Storage, Inc. (NYSE:LSI) has seen an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that LSI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are dozens of gauges stock traders can use to grade stocks. A duo of the most innovative gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best investment managers can beat their index-focused peers by a very impressive amount (see the details here).
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to check out the new hedge fund action encompassing Life Storage, Inc. (NYSE:LSI).
What have hedge funds been doing with Life Storage, Inc. (NYSE:LSI)?
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the third quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in LSI a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Paul Marshall and Ian Wace’s Marshall Wace LLP has the biggest position in Life Storage, Inc. (NYSE:LSI), worth close to $49.4 million, amounting to 0.3% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $48.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions contain Greg Poole’s Echo Street Capital Management, David Harding’s Winton Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Echo Street Capital Management allocated the biggest weight to Life Storage, Inc. (NYSE:LSI), around 0.44% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.37 percent of its 13F equity portfolio to LSI.
Now, key money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, established the most outsized position in Life Storage, Inc. (NYSE:LSI). Laurion Capital Management had $0.7 million invested in the company at the end of the quarter. Parvinder Thiara’s Athanor Capital also made a $0.5 million investment in the stock during the quarter. The other funds with brand new LSI positions are Joel Greenblatt’s Gotham Asset Management and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Life Storage, Inc. (NYSE:LSI) but similarly valued. These stocks are Empire State Realty Trust Inc (NYSE:ESRT), Silicon Laboratories (NASDAQ:SLAB), Science Applications International Corp (NYSE:SAIC), and The Wendy’s Company (NASDAQ:WEN). This group of stocks’ market valuations match LSI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ESRT | 18 | 115056 | 7 |
| SLAB | 26 | 87548 | 4 |
| SAIC | 27 | 298988 | 1 |
| WEN | 28 | 1039723 | -9 |
| Average | 24.75 | 385329 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $217 million in LSI’s case. The Wendy’s Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 18 bullish hedge fund positions. Life Storage, Inc. (NYSE:LSI) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately LSI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LSI investors were disappointed as the stock returned -23.6% during the same time period 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 in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
