Is Lorillard Inc. (NYSE:LO) undervalued? The smart money is buying. The number of long hedge fund positions increased by 1 in recent months.
According to most investors, hedge funds are assumed to be unimportant, old investment tools of years past. While there are more than 8000 funds with their doors open at present, we at Insider Monkey look at the top tier of this club, about 450 funds. Most estimates calculate that this group oversees the lion’s share of the hedge fund industry’s total capital, and by monitoring their best picks, we have deciphered a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Consequently, we’re going to take a look at the latest action regarding Lorillard Inc. (NYSE:LO).
What have hedge funds been doing with Lorillard Inc. (NYSE:LO)?
At the end of the first quarter, a total of 24 of the hedge funds we track were long in this stock, a change of 4% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably.
According to our comprehensive database, Jean-Marie Eveillard’s First Eagle Investment Management had the most valuable position in Lorillard Inc. (NYSE:LO), worth close to $455.2 million, accounting for 1.5% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $181.6 million position; 0.4% of its 13F portfolio is allocated to the company. Other hedgies that are bullish include Jacob Gottlieb’s Visium Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Lorillard Inc. (NYSE:LO). Arrowstreet Capital had 36.6 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $27.7 million investment in the stock during the quarter. The other funds with brand new LO positions are Matthew Tewksbury’s Stevens Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Paul Tudor Jones’s Tudor Investment Corp.
Insider trading activity in Lorillard Inc. (NYSE:LO)
Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has seen transactions within the past 180 days. Over the latest 180-day time period, Lorillard Inc. (NYSE:LO) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Lorillard Inc. (NYSE:LO). These stocks are Vector Group Ltd (NYSE:VGR), Philip Morris International Inc. (NYSE:PM), British American Tobacco PLC (ADR) (NYSEAMEX:BTI), Altria Group Inc (NYSE:MO), and Reynolds American, Inc. (NYSE:RAI). This group of stocks belong to the cigarettes industry and their market caps are similar to LO’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Vector Group Ltd (NYSE:VGR) | 8 | 1 | 3 |
| Philip Morris International Inc. (NYSE:PM) | 49 | 1 | 7 |
| British American Tobacco PLC (ADR) (NYSEAMEX:BTI) | 10 | 0 | 0 |
| Altria Group Inc (NYSE:MO) | 30 | 0 | 3 |
| Reynolds American, Inc. (NYSE:RAI) | 15 | 0 | 15 |
With the results demonstrated by the aforementioned tactics, everyday investors must always watch hedge fund and insider trading sentiment, and Lorillard Inc. (NYSE:LO) shareholders fit into this picture quite nicely.
