Is Lands’ End, Inc. (LE) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Lands’ End, Inc. (NASDAQ:LE) has seen a decrease in hedge fund interest lately. LE was in 9 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with LE positions at the end of the previous quarter. At the end of this article we will also compare LE to other stocks including Kinsale Capital Group Inc (NASDAQ:KNSL), Net 1 UEPS Technologies Inc (NASDAQ:UEPS), and Haynes International, Inc. (NASDAQ:HAYN) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

With all of this in mind, let’s go over the fresh action surrounding Lands’ End, Inc. (NASDAQ:LE).

Hedge fund activity in Lands’ End, Inc. (NASDAQ:LE)

At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in LE heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Edward Lampert’s ESL Investments has the biggest position in Lands’ End, Inc. (NASDAQ:LE), worth close to $97.4 million, amounting to 11% of its total 13F portfolio. Coming in second is Fairholme (FAIRX), led by Bruce Berkowitz, holding a $48.6 million position; 3.9% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Murray Stahl’s Horizon Asset Management, Steve Pei’s Gratia Capital and Robert Jaffe’s Force Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Lands’ End, Inc. (NASDAQ:LE) has sustained declining sentiment from hedge fund managers, we can see that there is a sect of hedge funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Chuck Royce’s Royce & Associates sold off the largest investment of the “upper crust” of funds studied by Insider Monkey, comprising an estimated $1.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $1.2 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lands’ End, Inc. (NASDAQ:LE) but similarly valued. We will take a look at Kinsale Capital Group Inc (NASDAQ:KNSL), Net 1 UEPS Technologies Inc (NASDAQ:UEPS), Haynes International, Inc. (NASDAQ:HAYN), and NACCO Industries, Inc. (NYSE:NC). This group of stocks’ market caps match LE’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $152 million in LE’s case. Net 1 UEPS Technologies Inc (NASDAQ:UEPS) is the most popular stock in this table. On the other hand Kinsale Capital Group Inc (NASDAQ:KNSL) is the least popular one with only 6 bullish hedge fund positions. Lands’ End, Inc. (NASDAQ:LE) 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 UEPS might be a better candidate to consider taking a long position in.