We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Lazard Ltd (NYSE:LAZ) based on those filings.
Lazard Ltd (NYSE:LAZ) was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2019. LAZ investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 15 hedge funds in our database with LAZ positions at the end of the previous quarter. Our calculations also showed that LAZ 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).
In today’s marketplace there are a lot of indicators stock market investors put to use to appraise publicly traded companies. A couple of the most innovative indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the S&P 500 by a very impressive amount (see the details here).
Mason Hawkins of Southeastern Asset Management
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. Keeping this in mind let’s take a look at the new hedge fund action regarding Lazard Ltd (NYSE:LAZ).
Hedge fund activity in Lazard Ltd (NYSE:LAZ)
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LAZ over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Southeastern Asset Management held the most valuable stake in Lazard Ltd (NYSE:LAZ), which was worth $319.3 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $217.9 million worth of shares. Fisher Asset Management, Royce & Associates, and Hosking Partners were 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 Southeastern Asset Management allocated the biggest weight to Lazard Ltd (NYSE:LAZ), around 5.32% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 2.73 percent of its 13F equity portfolio to LAZ.
Since Lazard Ltd (NYSE:LAZ) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that decided to sell off their entire stakes last quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the largest position of all the hedgies followed by Insider Monkey, worth an estimated $2.4 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $1.8 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lazard Ltd (NYSE:LAZ) but similarly valued. These stocks are ALLETE Inc (NYSE:ALE), Affiliated Managers Group, Inc. (NYSE:AMG), LogMeIn Inc (NASDAQ:LOGM), and FTI Consulting, Inc. (NYSE:FCN). This group of stocks’ market valuations resemble LAZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALE | 25 | 252011 | 3 |
| AMG | 38 | 548063 | 15 |
| LOGM | 31 | 504016 | -1 |
| FCN | 21 | 164212 | 0 |
| Average | 28.75 | 367076 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $702 million in LAZ’s case. Affiliated Managers Group, Inc. (NYSE:AMG) is the most popular stock in this table. On the other hand FTI Consulting, Inc. (NYSE:FCN) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Lazard Ltd (NYSE:LAZ) is even less popular than FCN. Hedge funds dodged a bullet by taking a bearish stance towards LAZ. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately LAZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LAZ investors were disappointed as the stock returned -40.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
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.
