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Billionaire Ken Fisher Loves This European Banking Stock

Does Lloyds Banking Group PLC (ADR) (NYSE:LYG) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and invest millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Lloyds Banking Group PLC (ADR) (NYSE:LYG) doesn’t have a lot of support from the hedge funds tracked in our database, though that isn’t uncommon when it comes to the ADRs of foreign companies, which they tend to be underweight. Just 6 hedge funds were long Lloyds on June 30, down from 9 on March 31. Billionaire Ken Fisher was the biggest bull, though Fisher Investments sold off 24% of its LYG position in Q3. Nonetheless, the stock was 7th on our article: Billionaire Ken Fisher is Bullish About These Dividend Stocks, thanks to its 5.39% dividend yield.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Fisher - FISHER ASSET MANAGEMENT

What does the smart money think about Lloyds Banking Group PLC (ADR) (NYSE:LYG)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 33% drop from the previous quarter. The graph below displays the number of hedge funds with bullish position in LYG over the last 6 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

LYG_nov2018

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Lloyds Banking Group PLC (ADR) (NYSE:LYG). Fisher Asset Management has a $394.4 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $3.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Michael Platt and William Reeves’ BlueCrest Capital Mgmt., John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.

Judging by the fact that Lloyds Banking Group PLC (ADR) (NYSE:LYG) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few fund managers who were dropping their full holdings heading into Q3. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of all the hedgies monitored by Insider Monkey, totaling about $1.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lloyds Banking Group PLC (ADR) (NYSE:LYG) but similarly valued. We will take a look at VMware, Inc. (NYSE:VMW), Walgreens Boots Alliance Inc (NASDAQ:WBA), The TJX Companies, Inc. (NYSE:TJX), and Altaba Inc. (NASDAQ:AABA). This group of stocks’ market valuations resemble LYG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VMW 37 3333205 10
WBA 39 1551453 3
TJX 39 2736377 -6
AABA 95 22406721 -5

As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $7.51 billion. That figure was $399 million in LYG’s case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks Lloyds Banking Group PLC (ADR) (NYSE:LYG) is even less popular than VMW. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

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

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