Hedge Funds Are Dumping Loews Corporation (L)

A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Loews Corporation (NYSE:L) during the quarter.

Loews Corporation (NYSE:L) was in 19 hedge funds’ portfolios at the end of September. L has seen a decrease in hedge fund interest in recent months. There were 26 hedge funds in our database with L holdings at the end of the previous quarter. At the end of this article we will also compare L to other stocks including Best Buy Co., Inc. (NYSE:BBY), Agrium Inc. (USA) (NYSE:AGU), and Fidelity National Financial Inc (NYSE:FNF) to get a better sense of its popularity.

To the average investor there are a lot of formulas investors use to grade stocks. Some of the most innovative formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best money managers can trounce the broader indices by a significant margin (see the details here).

Now, let’s view the recent action regarding Loews Corporation (NYSE:L).

Hedge fund activity in Loews Corporation (NYSE:L)

Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the most valuable position in Loews Corporation (NYSE:L). Southeastern Asset Management has a $720.4 million position in the stock, comprising 6.1% of its 13F portfolio. The second most bullish fund manager is Third Avenue Management, managed by Martin Whitman, which holds a $43.8 million position; 1.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group.

Seeing as Loews Corporation (NYSE:L) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few hedge funds who were dropping their entire stakes in the third quarter. Interestingly, Cliff Asness’s AQR Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, valued at about $7.7 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $2.6 million worth. These moves are interesting, as total hedge fund interest was cut by 7 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Loews Corporation (NYSE:L) but similarly valued. These stocks are Best Buy Co., Inc. (NYSE:BBY), Agrium Inc. (USA) (NYSE:AGU), Fidelity National Financial Inc (NYSE:FNF), and FleetCor Technologies, Inc. (NYSE:FLT). This group of stocks’ market values match L’s market value.

As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $2197 million. That figure was $1010 million in L’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Agrium Inc. (USA) (NYSE:AGU) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Loews Corporation (NYSE:L) is even less popular than AGU. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.