The LGL Group, Inc. (LGL): Hedge Fund Sentiment Unchanged

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 900 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 The LGL Group, Inc. (NYSE:LGL).

Hedge fund interest in The LGL Group, Inc. (NYSE:LGL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LGL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare LGL to other stocks including Rezolute, Inc. (NASDAQ:RZLT), Predictive Oncology Inc. (NASDAQ:POAI), and Evoke Pharma Inc (NASDAQ:EVOK) to get a better sense of its popularity.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $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 take a look at the fresh hedge fund action encompassing The LGL Group, Inc. (NYSE:LGL).

Do Hedge Funds Think LGL Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in LGL over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GAMCO Investors was the largest shareholder of The LGL Group, Inc. (NYSE:LGL), with a stake worth $6 million reported as of the end of March. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $3.1 million. GAMCO Investors was 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 Minerva Advisors allocated the biggest weight to The LGL Group, Inc. (NYSE:LGL), around 0.08% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to LGL.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The LGL Group, Inc. (NYSE:LGL) but similarly valued. We will take a look at Rezolute, Inc. (NASDAQ:RZLT), Predictive Oncology Inc. (NASDAQ:POAI), Evoke Pharma Inc (NASDAQ:EVOK), Kaspien Holdings Inc. (NASDAQ:KSPN), Dawson Geophysical Company (NASDAQ:DWSN), SeaChange International, Inc. (NASDAQ:SEAC), and Unique Fabricating Inc (NYSE:UFAB). This group of stocks’ market caps are similar to LGL’s market cap.

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As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $10 million in LGL’s case. Rezolute, Inc. (NASDAQ:RZLT) is the most popular stock in this table. On the other hand Kaspien Holdings Inc. (NASDAQ:KSPN) is the least popular one with only 1 bullish hedge fund positions. The LGL Group, Inc. (NYSE:LGL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LGL is 48. 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 positive signal but 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately LGL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LGL were disappointed as the stock returned -0.8% since the end of March (through 6/11) 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 many of these stocks already outperformed the market since 2019.

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