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Do Hedge Funds Love LCI Industries (LCII)?

Is LCI Industries (NYSE:LCII) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

LCI Industries (NYSE:LCII) was in 12 hedge funds’ portfolios at the end of September. LCII shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 8 hedge funds in our database with LCII positions at the end of the previous quarter. Our calculations also showed that lcii isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

We’re going to take a look at the key hedge fund action regarding LCI Industries (NYSE:LCII).

How are hedge funds trading LCI Industries (NYSE:LCII)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LCII over the last 13 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with LCII Positions

The largest stake in LCI Industries (NYSE:LCII) was held by Royce & Associates, which reported holding $30.9 million worth of stock at the end of September. It was followed by East Side Capital (RR Partners) with a $16.8 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Renaissance Technologies.

Now, specific money managers have jumped into LCI Industries (NYSE:LCII) headfirst. Millennium Management, managed by Israel Englander, initiated the most valuable position in LCI Industries (NYSE:LCII). Millennium Management had $12.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.9 million position during the quarter. The other funds with brand new LCII positions are Noam Gottesman’s GLG Partners and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LCI Industries (NYSE:LCII) but similarly valued. We will take a look at ServisFirst Bancshares, Inc. (NASDAQ:SFBS), Talend S.A. (NASDAQ:TLND), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). All of these stocks’ market caps resemble LCII’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFBS 8 14588 1
TLND 22 569494 7
BBBY 28 148157 -1
CRZO 18 232443 0
Average 19 241171 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $71 million in LCII’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only 8 bullish hedge fund positions. LCI Industries (NYSE:LCII) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BBBY might be a better candidate to consider a long position.

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

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