Do Hedge Funds Love Lincoln Electric Holdings, Inc. (LECO)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Lincoln Electric Holdings, Inc. (NASDAQ:LECO) has seen a decrease in hedge fund interest lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Godaddy Inc (NYSE:GDDY), Siliconware Precision Industries (ADR) (NASDAQ:SPIL), and Team Health Holdings LLC (NYSE:TMH) to gather more data points.

In the 21st century investor’s toolkit there are tons of methods stock traders put to use to assess their holdings. A pair of the most innovative methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best money managers can beat the market by a very impressive margin (see the details here).

Now, let’s take a peek at the latest action regarding Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

Hedge fund activity in Lincoln Electric Holdings, Inc. (NASDAQ:LECO)

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Lincoln Electric Holdings, Inc. (NASDAQ:LECO). Royce & Associates has an $114 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding an $57 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish encompass Joel Greenblatt’s Gotham Asset Management, Cliff Asness’ AQR Capital Management and Charles Paquelet’s Skylands Capital.

Due to the fact that Lincoln Electric Holdings, Inc. (NASDAQ:LECO) has experienced falling interest from the smart money, it’s easy to see that there was a specific group of fund managers who were dropping their positions entirely heading into Q4. Intriguingly, Jim Simons’s Renaissance Technologies dropped the largest investment of all the hedgies followed by Insider Monkey, valued at close to $7 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lincoln Electric Holdings, Inc. (NASDAQ:LECO) but similarly valued. We will take a look at Godaddy Inc (NYSE:GDDY), Siliconware Precision Industries (ADR) (NASDAQ:SPIL), Team Health Holdings LLC (NYSE:TMH), and Euronet Worldwide, Inc. (NASDAQ:EEFT). This group of stocks’ market caps are similar to LECO’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $277 million in LECO’s case. Team Health Holdings LLC (NYSE:TMH) is the most popular stock in this table, while Siliconware Precision Industries (ADR) (NASDAQ:SPIL) is the least popular one with only 10 bullish hedge fund positions. Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TMH might be a better candidate to consider a long position.