Archaea Energy Inc. (LFG) : Are Hedge Funds Right About This Stock?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Archaea Energy Inc. (NYSE:LFG).

Is Archaea Energy Inc. (NYSE:LFG) a superb stock to buy now? The best stock pickers were in an optimistic mood. The number of long hedge fund bets advanced by 25 in recent months. Archaea Energy Inc. (NYSE:LFG) was in 25 hedge funds’ portfolios at the end of September. Our calculations also showed that LFG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a glance at the key hedge fund action surrounding Archaea Energy Inc. (NYSE:LFG).

Do Hedge Funds Think LFG Is A Good Stock To Buy Now?

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LFG over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Third Point held the most valuable stake in Archaea Energy Inc. (NYSE:LFG) , which was worth $80.9 million at the end of the third quarter. On the second spot was Baupost Group which amassed $59 million worth of shares. Kensico Capital, Ancient Art (Teton Capital), and LMR Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Brightline Capital allocated the biggest weight to Archaea Energy Inc. (NYSE:LFG) , around 10.97% of its 13F portfolio. Gratia Capital is also relatively very bullish on the stock, setting aside 3.16 percent of its 13F equity portfolio to LFG.

As one would reasonably expect, some big names have been driving this bullishness. Third Point, managed by Dan Loeb, established the most valuable position in Archaea Energy Inc. (NYSE:LFG) . Third Point had $80.9 million invested in the company at the end of the quarter. Seth Klarman’s Baupost Group also initiated a $59 million position during the quarter. The following funds were also among the new LFG investors: Michael Lowenstein’s Kensico Capital, Quincy Lee’s Ancient Art (Teton Capital), and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Archaea Energy Inc. (NYSE:LFG) but similarly valued. We will take a look at Everi Holdings Inc (NYSE:EVRI), Hello Group Inc. (NASDAQ:MOMO), Cimpress plc (NASDAQ:CMPR), Cavco Industries, Inc. (NASDAQ:CVCO), First Midwest Bancorp Inc (NASDAQ:FMBI), C4 Therapeutics, Inc. (NASDAQ:CCCC), and Nuvation Bio Inc. (NYSE:NUVB). This group of stocks’ market valuations match LFG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $318 million in LFG’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand First Midwest Bancorp Inc (NASDAQ:FMBI) is the least popular one with only 16 bullish hedge fund positions. Archaea Energy Inc. (NYSE:LFG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LFG is 58. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately LFG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LFG were disappointed as the stock returned 5.8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.