What Explains the Huge Jump in Louisiana-Pacific Corporation (LPX)’s Hedge Fund Ownership?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Louisiana-Pacific Corporation (NYSE:LPX).

Louisiana-Pacific Corporation (NYSE:LPX) has experienced an increase in enthusiasm from smart money of late. LPX was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. There were 23 hedge funds in our database with LPX positions at the end of the previous quarter. At the end of this article we will also compare LPX to other stocks including Virgin America Inc (NASDAQ:VA), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and Grifols SA, Barcelona (NASDAQ:GRFS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, let’s take a look at the recent action encompassing Louisiana-Pacific Corporation (NYSE:LPX).

What have hedge funds been doing with Louisiana-Pacific Corporation (NYSE:LPX)?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a 39% jump from the previous quarter. Hedge fund ownership of the stock has doubled since the end of 2015, when just 16 hedge funds were long LPX. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Louisiana-Pacific Corporation (NYSE:LPX). Adage Capital Management has a $89 million position in the stock. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $68.4 million position. Some other peers that hold long positions comprise Dmitry Balyasny’s Balyasny Asset Management, Ross Margolies’ Stelliam Investment Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Consequently, specific money managers were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, initiated the largest position in Louisiana-Pacific Corporation (NYSE:LPX). Gotham Asset Management had $15.9 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $11.9 million investment in the stock during the quarter. The other funds with brand new LPX positions are Ken Grossman and Glen Schneider’s SG Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Louisiana-Pacific Corporation (NYSE:LPX) but similarly valued. These stocks are Virgin America Inc (NASDAQ:VA), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Grifols SA, Barcelona (NASDAQ:GRFS), and Wintrust Financial Corp (NASDAQ:WTFC). This group of stocks’ market valuations match LPX’s market valuation.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $460 million in LPX’s case. Virgin America Inc (NASDAQ:VA) is the most popular stock in this table. On the other hand Grifols SA, Barcelona (NASDAQ:GRFS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Louisiana-Pacific Corporation (NYSE:LPX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None