Was The Smart Money Right About Lululemon Athletica inc. (LULU)?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Lululemon Athletica inc. (NASDAQ:LULU).

Lululemon Athletica inc. (NASDAQ:LULU) was in 46 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 52. LULU investors should be aware of an increase in enthusiasm from smart money of late. There were 41 hedge funds in our database with LULU holdings at the end of March. Our calculations also showed that LULU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV 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. Now we’re going to check out the new hedge fund action surrounding Lululemon Athletica inc. (NASDAQ:LULU).

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

At the end of the second quarter, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in LULU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Lululemon Athletica inc. (NASDAQ:LULU) was held by Arrowstreet Capital, which reported holding $153.6 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $149.9 million position. Other investors bullish on the company included Citadel Investment Group, Broad Peak Investment Holdings, and Millennium Management. In terms of the portfolio weights assigned to each position Broad Peak Investment Holdings allocated the biggest weight to Lululemon Athletica inc. (NASDAQ:LULU), around 6.95% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, dishing out 6.46 percent of its 13F equity portfolio to LULU.

Now, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most valuable position in Lululemon Athletica inc. (NASDAQ:LULU). Balyasny Asset Management had $71.8 million invested in the company at the end of the quarter. Karim Abbadi and Edward McBride’s Centiva Capital also made a $10 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Leonard Green’s Leonard Green & Partners, and Elise Di Vincenzo Crumbine’s Stormborn Capital Management.

Let’s now review hedge fund activity in other stocks similar to Lululemon Athletica inc. (NASDAQ:LULU). These stocks are Thomson Reuters Corporation (NYSE:TRI), Johnson Controls International plc (NYSE:JCI), EOG Resources Inc (NYSE:EOG), TC Energy Corporation (NYSE:TRP), Align Technology, Inc. (NASDAQ:ALGN), Monster Beverage Corp (NASDAQ:MNST), and eBay Inc (NASDAQ:EBAY). All of these stocks’ market caps match LULU’s market cap.

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As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1469 million. That figure was $953 million in LULU’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 22 bullish hedge fund positions. Lululemon Athletica inc. (NASDAQ:LULU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LULU is 70.8. 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. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on LULU as the stock returned 28.2% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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