This Metric Says You Are Smart to Buy La-Z-Boy Incorporated (LZB)

Is La-Z-Boy Incorporated (NYSE:LZB) going to take off soon? The best stock pickers are turning bullish. The number of bullish hedge fund bets rose by 4 in recent months.

In the eyes of most market participants, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are more than 8000 funds trading at present, we hone in on the masters of this club, about 450 funds. It is estimated that this group oversees the lion’s share of the smart money’s total asset base, and by keeping an eye on their top picks, we have found a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as integral, positive insider trading sentiment is a second way to parse down the investments you’re interested in. There are lots of incentives for a corporate insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Various empirical studies have demonstrated the useful potential of this method if shareholders know where to look (learn more here).

With these “truths” under our belt, let’s take a peek at the latest action surrounding La-Z-Boy Incorporated (NYSE:LZB).

What have hedge funds been doing with La-Z-Boy Incorporated (NYSE:LZB)?

At the end of the first quarter, a total of 16 of the hedge funds we track were long in this stock, a change of 33% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the biggest position in La-Z-Boy Incorporated (NYSE:LZB). Royce & Associates has a $33.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Impala Asset Management, managed by Robert Bishop, which held a $18.9 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, Cliff Asness’s AQR Capital Management and Mario Gabelli’s GAMCO Investors.

As aggregate interest increased, some big names were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the biggest position in La-Z-Boy Incorporated (NYSE:LZB). LMR Partners had 0.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.3 million position during the quarter. The following funds were also among the new LZB investors: Ken Gray and Steve Walsh’s Bryn Mawr Capital, Mike Vranos’s Ellington, and D. E. Shaw’s D E Shaw.

How have insiders been trading La-Z-Boy Incorporated (NYSE:LZB)?

Insider buying is most useful when the company we’re looking at has seen transactions within the past half-year. Over the latest six-month time frame, La-Z-Boy Incorporated (NYSE:LZB) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to La-Z-Boy Incorporated (NYSE:LZB). These stocks are Tempur-Pedic International Inc. (NYSE:TPX), American Woodmark Corporation (NASDAQ:AMWD), Mattress Firm Holding Corp (NASDAQ:MFRM), Select Comfort Corp. (NASDAQ:SCSS), and Ethan Allen Interiors Inc. (NYSE:ETH). This group of stocks belong to the home furnishings & fixtures industry and their market caps resemble LZB’s market cap.

With the returns demonstrated by the aforementioned research, everyday investors should always watch hedge fund and insider trading activity, and La-Z-Boy Incorporated (NYSE:LZB) is no exception.

Click here to learn why you should track hedge funds