How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Lam Research Corporation (NASDAQ:LRCX) and determine whether hedge funds had an edge regarding this stock.
Lam Research Corporation (NASDAQ:LRCX) investors should be aware of a decrease in hedge fund sentiment recently. Lam Research Corporation (NASDAQ:LRCX) was in 47 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 62. There were 58 hedge funds in our database with LRCX holdings at the end of June. Our calculations also showed that LRCX 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. With all of this in mind let’s go over the recent hedge fund action regarding Lam Research Corporation (NASDAQ:LRCX).
Philippe Laffont of Coatue Management
Do Hedge Funds Think LRCX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LRCX over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Lam Research Corporation (NASDAQ:LRCX), with a stake worth $992.8 million reported as of the end of September. Trailing Fisher Asset Management was GQG Partners, which amassed a stake valued at $560.1 million. Citadel Investment Group, Alkeon Capital Management, and Coatue Management 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 Marlowe Partners allocated the biggest weight to Lam Research Corporation (NASDAQ:LRCX), around 19.74% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 7.93 percent of its 13F equity portfolio to LRCX.
Seeing as Lam Research Corporation (NASDAQ:LRCX) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of money managers who were dropping their positions entirely by the end of the third quarter. It’s worth mentioning that Zach Schreiber’s Point State Capital dumped the biggest position of all the hedgies followed by Insider Monkey, worth close to $95 million in stock. Suzi Nutton (CEO)’s fund, Lansdowne Partners, also cut its stock, about $94.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 11 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lam Research Corporation (NASDAQ:LRCX) but similarly valued. These stocks are Micron Technology, Inc. (NASDAQ:MU), Dell Technologies Inc. (NYSE:DELL), The TJX Companies, Inc. (NYSE:TJX), Truist Financial Corporation (NYSE:TFC), HCA Healthcare Inc (NYSE:HCA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Marsh & McLennan Companies, Inc. (NYSE:MMC). This group of stocks’ market values resemble LRCX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MU | 63 | 3841359 | -24 |
| DELL | 60 | 6142951 | -2 |
| TJX | 63 | 2330294 | 7 |
| TFC | 34 | 275906 | -5 |
| HCA | 72 | 3309822 | 12 |
| ZM | 56 | 6003836 | -3 |
| MMC | 42 | 1987176 | 1 |
| Average | 55.7 | 3413049 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.7 hedge funds with bullish positions and the average amount invested in these stocks was $3413 million. That figure was $3519 million in LRCX’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Truist Financial Corporation (NYSE:TFC) is the least popular one with only 34 bullish hedge fund positions. Lam Research Corporation (NASDAQ:LRCX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LRCX is 33.8. 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. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on LRCX as the stock returned 3.9% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
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Disclosure: None. This article was originally published at Insider Monkey.
