We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Lowe’s Companies, Inc. (NYSE:LOW) and determine whether hedge funds skillfully traded this stock.
Lowe’s Companies, Inc. (NYSE:LOW) has experienced a decrease in enthusiasm from smart money in recent months. Lowe’s Companies, Inc. (NYSE:LOW) was in 60 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 89. There were 63 hedge funds in our database with LOW positions at the end of the second quarter. Our calculations also showed that LOW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Richard Chilton of Chilton Investment Company
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Lowe’s Companies, Inc. (NYSE:LOW).
Do Hedge Funds Think LOW Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in LOW over the last 25 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Lowe’s Companies, Inc. (NYSE:LOW) was held by Pershing Square, which reported holding $2076.6 million worth of stock at the end of September. It was followed by Soroban Capital Partners with a $936.7 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Lowe’s Companies, Inc. (NYSE:LOW), around 21.94% of its 13F portfolio. Soroban Capital Partners is also relatively very bullish on the stock, designating 8.77 percent of its 13F equity portfolio to LOW.
Judging by the fact that Lowe’s Companies, Inc. (NYSE:LOW) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that slashed their positions entirely in the third quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management sold off the biggest position of the 750 funds followed by Insider Monkey, comprising close to $34.7 million in call options, and Donald Sussman’s Paloma Partners was right behind this move, as the fund cut about $28.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lowe’s Companies, Inc. (NYSE:LOW) but similarly valued. We will take a look at The Unilever Group (NYSE:UL), The Charles Schwab Corporation (NYSE:SCHW), Sony Group Corp (NYSE:SONY), BHP Group (NYSE:BHP), HDFC Bank Limited (NYSE:HDB), American Express Company (NYSE:AXP), and Bristol Myers Squibb Company (NYSE:BMY). This group of stocks’ market values are closest to LOW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UL | 17 | 876681 | -2 |
| SCHW | 59 | 4578571 | -13 |
| SONY | 19 | 388862 | -1 |
| BHP | 18 | 899835 | 0 |
| HDB | 40 | 1794819 | 1 |
| AXP | 57 | 29603207 | 5 |
| BMY | 74 | 4758551 | 1 |
| Average | 40.6 | 6128647 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.6 hedge funds with bullish positions and the average amount invested in these stocks was $6129 million. That figure was $5080 million in LOW’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 17 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. Our overall hedge fund sentiment score for LOW is 59.9. 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 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on LOW as the stock returned 17.8% since the end of Q3 (through 1/31) 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.
