Should You Buy Lowe’s Companies, Inc. (LOW)?

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings discloses the funds’ positions on December 31. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Lowe’s Companies, Inc. (NYSE:LOW) based on those filings.

Lowe’s Companies, Inc. (NYSE:LOW) has experienced an increase in hedge fund interest of late. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Diageo plc (ADR) (NYSE:DEO), American Express Company (NYSE:AXP), and Biogen Idec Inc. (NASDAQ:BIIB) to gather more data points.

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Before we take a closer look at the hedge fund sentiment towards Lowe’s Companies, let’s assess the latest developments surrounding the stock.

Over the last 52 weeks, Lowe’s Companies’ stock performed almost in line with the market, having inched down by around 3.70%. As one of the largest home improvement chains in the US, the company has benefitted greatly from the growth in the housing market as lower interest rates, lower unemployment and higher wages sparked an increase in spending on housing renovation. In this way, the company posted strong results for the last quarter, with sales advancing by 5.6% on the year to $13.24 billion, beating the estimates of $13.07 billion. Its same-store sales advanced by 5.2% in the quarter. At the same time Lowe’s Companies’ adjusted EPS amounted to $0.59, which was in line with estimates.

For the current year, Lowe’s anticipates its sales to advance by 6% to $62.62 billion, which tops the consensus estimate of a 4.8% growth. In this way, with the Fed not rushing to raise interest rates, the housing market is expected to continue its expansion, which means that Lowe’s stock can rebound from the losses registered for the past year and return to growth. Analysts are also optimistic on the stock and have a consensus price target of $80.50, implying an upside potential of around 14%.

With all of this in mind, we’re going to take a look at the new action encompassing Lowe’s Companies, Inc. (NYSE:LOW).

What does the smart money think about Lowe’s Companies, Inc. (NYSE:LOW)?

At the end of the fourth quarter, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 18% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Greenhaven Associates, managed by Edgar Wachenheim, holds the most valuable position in Lowe’s Companies, Inc. (NYSE:LOW). Greenhaven Associates has a $722.3 million position in the stock, comprising 13.7% of its 13F portfolio. The second largest stake is held by Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $544.1 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism encompass Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, created the largest position in Lowe’s Companies, Inc. (NYSE:LOW). Alkeon Capital Management had $50.6 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also made a $47.3 million investment in the stock during the quarter. The following funds were also among the new LOW investors: Clint Carlson’s Carlson Capital, Benjamin A. Smith’s Laurion Capital Management, and Anand Parekh’s Alyeska Investment Group.

Let’s check out hedge fund activity in other stocks similar to Lowe’s Companies, Inc. (NYSE:LOW). We will take a look at Diageo plc (ADR) (NYSE:DEO), American Express Company (NYSE:AXP), Biogen Idec Inc. (NASDAQ:BIIB), and Accenture Plc (NYSE:ACN). This group of stocks’ market values are closest to LOW’s market value.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $5.05 billion. That figure was $3.91 billion in LOW’s case. Biogen Idec Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Diageo plc (ADR) (NYSE:DEO) is the least popular one with only 19 bullish hedge fund positions. Lowe’s Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BIIB might be a better candidate to consider a long position.

Disclosure: none