Here is What Hedge Funds Think About LendingClub Corp (LC)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

LendingClub Corp (NYSE:LC) was in 15 hedge funds’ portfolios at the end of September. LC has seen a decrease in activity from the world’s largest hedge funds recently. There were 26 hedge funds in our database with LC positions at the end of the previous quarter. 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 Albemarle Corporation (NYSE:ALB), Equity Lifestyle Properties, Inc. (NYSE:ELS), and Owens Corning (NYSE:OC) to gather more data points.

In the eyes of most stock holders, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are greater than an 8000 funds trading at the moment, We look at the leaders of this club, around 700 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the smart money’s total asset base, and by following their top equity investments, Insider Monkey has brought to light several investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to take a look at the new action regarding LendingClub Corp (NYSE:LC).

What does the smart money think about LendingClub Corp (NYSE:LC)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -42% from the second quarter. With the smart money’s sentiment swirling, 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, David Gallo’s Valinor Management LLC has the number one position in LendingClub Corp (NYSE:LC), worth close to $190.5 million, amounting to 5% of its total 13F portfolio. On Valinor Management LLC’s heels is Blue Ridge Capital, managed by John Griffin, which holds a $55.6 million position; 0.6% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish consist of Jason Karp’s Tourbillon Capital Partners, Brian Jackelow’s SAB Capital Management and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.

Since LendingClub Corp (NYSE:LC) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies that elected to cut their positions entirely heading into Q4. It’s worth mentioning that George Soros’ Soros Fund Management cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $48.7 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dropped about $16.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 11 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to LendingClub Corp (NYSE:LC). These stocks are Albemarle Corporation (NYSE:ALB), Equity Lifestyle Properties, Inc. (NYSE:ELS), Owens Corning (NYSE:OC), and Hubbell Incorporated (NYSE:HUB). This group of stocks’ market values are closest to LC’s market value.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $661 million. That figure was $311 million in LC’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 13 bullish hedge fund positions. LendingClub Corp (NYSE:LC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OC might be a better candidate to consider a long position.