Hedge Fund Data Suggests These Upgraded Stocks Are Worth Your Attention

US stocks traded higher on Monday to recover some of the loses registered on Friday, on the back of the Federal Reserve’s decision to keep interest rates unchanged. Nevertheless, two stocks, specifically Lululemon Athletica Inc. (NASDAQ:LULU) and Paypal Holdings Inc (NASDAQ:PYPL) inched higher after being upgraded by analysts earlier this morning. Analyst updates aside, let us take a closer look at the opinion of some of the best hedge funds regarding each of these two stocks.

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One of the ways that allows us to analyze the hedge fund sentiment is to ompile the data from equity portfolios of a large number of hedge funds. At Insider Monkey we follow over 730 hedge funds and by analyzing their quarterly filings, we have determined which stocks rank among their most popular picks. We use these figures in order to determined their top small-cap ideas, which have a high chance of significantly outperforming the market in the medium- to long-term. Our strategy imitates a portfolio of 15 most popular small-caps among hedge funds and it has returned 118% in the last 36 months, outperforming the market by some 60 percentage points (read more details here).

Lululemon Athletica Inc. (NASDAQ:LULU)‘s stock inched up by around 3% on Monday on a trading volume close to the average after Morgan Stanley has updated the stock to ‘Overweight’ from ‘Equal Weight’ and raised the price target to $68 from $56. The company, which designs and retails technical athletic apparel, received the upgrade as Morgan Stanley expressed its confidence that Lululemon’s EBIT margin will reach an inflection point next year fueled by a 20% EPS growth.

Morgan Stanley’s outlook on Lululemon Athletica Inc. (NASDAQ:LULU) seems to be supported by the hedge funds, as 35 investors from our database held nearly 8% of the company at the end of June, up by three over the quarter. However, the total value of their holdings slid to $681.29 million from $715.97 million a quarter earlier. Among these investors, the largest stake is held by Ken Griffin‘s Citadel Investment Group, which disclosed ownership of 2.03 million shares in its latest 13F filing, followed by Alexander Mitchell’s Scopus Asset Management, which raised its holding by 23%  to 1.35 million shares. On the other hand, Dmitry Balyasny’s Balyasny Asset Management decreased its position by 14% to 718,006 shares, but still ranked as the third biggest shareholder of Lululemon Athletica Inc. (NASDAQ:LULU) at the end of June.