Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Lyft, Inc. (NASDAQ:LYFT) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Lyft, Inc. (NASDAQ:LYFT) was in 45 hedge funds’ portfolios at the end of the fourth quarter of 2019. LYFT shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 35 hedge funds in our database with LYFT holdings at the end of the previous quarter. Our calculations also showed that LYFT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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. 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the new hedge fund action surrounding Lyft, Inc. (NASDAQ:LYFT).
How are hedge funds trading Lyft, Inc. (NASDAQ:LYFT)?
At the end of the fourth quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in LYFT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Lyft, Inc. (NASDAQ:LYFT), worth close to $162.9 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Glade Brook Capital Partners, managed by Paul Hudson, which holds a $122.9 million position; the fund has 38.3% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Glen Kacher’s Light Street Capital, Aaron Cowen’s Suvretta Capital Management and Alexander Mitchell’s Scopus Asset Management. In terms of the portfolio weights assigned to each position Glade Brook Capital Partners allocated the biggest weight to Lyft, Inc. (NASDAQ:LYFT), around 38.28% of its 13F portfolio. Meru Capital is also relatively very bullish on the stock, dishing out 25.54 percent of its 13F equity portfolio to LYFT.
Consequently, key hedge funds have jumped into Lyft, Inc. (NASDAQ:LYFT) headfirst. Scopus Asset Management, managed by Alexander Mitchell, assembled the most outsized position in Lyft, Inc. (NASDAQ:LYFT). Scopus Asset Management had $55.4 million invested in the company at the end of the quarter. C. Ashton Newhall and James Lim’s Greenspring Associates also made a $33.7 million investment in the stock during the quarter. The other funds with new positions in the stock are George McCabe’s Portolan Capital Management, Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital, and Gavin Baker’s Atreides Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lyft, Inc. (NASDAQ:LYFT) but similarly valued. These stocks are Icahn Enterprises LP (NASDAQ:IEP), Duke Realty Corporation (NYSE:DRE), Continental Resources, Inc. (NYSE:CLR), and W.R. Berkley Corporation (NYSE:WRB). All of these stocks’ market caps are closest to LYFT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IEP | 4 | 12205892 | -1 |
| DRE | 24 | 183153 | 5 |
| CLR | 38 | 569767 | -1 |
| WRB | 34 | 417937 | 8 |
| Average | 25 | 3344187 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $3344 million. That figure was $984 million in LYFT’s case. Continental Resources, Inc. (NYSE:CLR) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Lyft, Inc. (NASDAQ:LYFT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately LYFT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LYFT were disappointed as the stock returned -31.2% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
