In this article we will check out the progression of hedge fund sentiment towards Lululemon Athletica inc. (NASDAQ:LULU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Lululemon Athletica inc. (NASDAQ:LULU) worth your attention right now? Investors who are in the know were in a bullish mood. The number of long hedge fund bets inched up by 5 in recent months. Lululemon Athletica inc. (NASDAQ:LULU) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic is 52. Our calculations also showed that LULU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 41 hedge funds in our database with LULU holdings at the end of March.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
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Do Hedge Funds Think LULU Is A Good Stock To Buy Now?
At the end of June, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LULU over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
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, earmarking 6.46 percent of its 13F equity portfolio to LULU.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated 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 initiated a $10 million position 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 check out hedge fund activity in other stocks – not necessarily in the same industry as Lululemon Athletica inc. (NASDAQ:LULU) but similarly valued. We will take a look at 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.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRI | 27 | 354844 | -1 |
| JCI | 39 | 1270005 | -2 |
| EOG | 35 | 411137 | 5 |
| TRP | 22 | 118166 | -3 |
| ALGN | 57 | 2689837 | 8 |
| MNST | 46 | 2310929 | 1 |
| EBAY | 39 | 3126079 | -12 |
| Average | 37.9 | 1468714 | -0.6 |
View table here if you experience formatting issues.
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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on LULU as the stock returned 10% since the end of Q2 (through 10/1) 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.
