Lithia Motors Inc (LAD): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Lithia Motors Inc (NYSE:LAD) was in 18 hedge funds’ portfolio at the end of the first quarter of 2013. LAD investors should pay attention to an increase in enthusiasm from smart money lately. There were 16 hedge funds in our database with LAD positions at the end of the previous quarter.

In today’s marketplace, there are many metrics market participants can use to watch publicly traded companies. Some of the most under-the-radar are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite investment managers can outperform the S&P 500 by a healthy margin (see just how much).

Just as important, optimistic insider trading activity is another way to break down the marketplace. Just as you’d expect, there are lots of reasons for an insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Various academic studies have demonstrated the valuable potential of this strategy if shareholders know what to do (learn more here).

With all of this in mind, it’s important to take a glance at the latest action regarding Lithia Motors Inc (NYSE:LAD).

What have hedge funds been doing with Lithia Motors Inc (NYSE:LAD)?

At Q1’s end, a total of 18 of the hedge funds we track were long in this stock, a change of 13% from the first quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably.

According to our comprehensive database, Jeffrey Vinik’s Vinik Asset Management had the most valuable position in Lithia Motors Inc (NYSE:LAD), worth close to $21.3 million, accounting for 0.6% of its total 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $16.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include John Murphy’s Alydar Capital, Chuck Royce’s Royce & Associates and Andrew Sandler’s Sandler Capital Management.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Alydar Capital, managed by John Murphy, created the largest position in Lithia Motors Inc (NYSE:LAD). Alydar Capital had 12.2 million invested in the company at the end of the quarter. Van Schreiber’s Bennett Lawrence Management also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, David Costen Haley’s HBK Investments, and Matthew Hulsizer’s PEAK6 Capital Management.

Insider trading activity in Lithia Motors Inc (NYSE:LAD)

Insider buying is at its handiest when the company in question has experienced transactions within the past six months. Over the latest half-year time period, Lithia Motors Inc (NYSE:LAD) has seen zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Lithia Motors Inc (NYSE:LAD). These stocks are Rush Enterprises, Inc. (NASDAQ:RUSHB), KAR Auction Services Inc (NYSE:KAR), Sonic Automotive Inc (NYSE:SAH), Group 1 Automotive, Inc. (NYSE:GPI), and Asbury Automotive Group, Inc. (NYSE:ABG). All of these stocks are in the auto dealerships industry and their market caps resemble LAD’s market cap.