Do Hedge Funds Love Louisiana-Pacific Corporation (LPX)?

In this article we will check out the progression of hedge fund sentiment towards Louisiana-Pacific Corporation (NYSE:LPX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ 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.

Is Louisiana-Pacific Corporation (NYSE:LPX) going to take off soon? Prominent investors were becoming less confident. The number of long hedge fund bets were trimmed by 11 lately. Louisiana-Pacific Corporation (NYSE:LPX) was in 30 hedge funds’ portfolios at the end of March. The all time high for this statistic is 41. Our calculations also showed that LPX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Andrew Sandler of Sandler Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to analyze the fresh hedge fund action encompassing Louisiana-Pacific Corporation (NYSE:LPX).

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

At first quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LPX over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LPX A Good Stock To Buy?

The largest stake in Louisiana-Pacific Corporation (NYSE:LPX) was held by Platinum Asset Management, which reported holding $237.9 million worth of stock at the end of December. It was followed by Scopus Asset Management with a $77.6 million position. Other investors bullish on the company included Marshall Wace LLP, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to Louisiana-Pacific Corporation (NYSE:LPX), around 5.31% of its 13F portfolio. Voss Capital is also relatively very bullish on the stock, earmarking 4.28 percent of its 13F equity portfolio to LPX.

Seeing as Louisiana-Pacific Corporation (NYSE:LPX) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that slashed their entire stakes by the end of the first quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, worth about $21.3 million in stock. Jeffrey Altman’s fund, Owl Creek Asset Management, also sold off its stock, about $15.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 11 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Louisiana-Pacific Corporation (NYSE:LPX). These stocks are Colfax Corporation (NYSE:CFX), New York Community Bancorp, Inc. (NYSE:NYCB), MSA Safety Incorporated (NYSE:MSA), Medpace Holdings, Inc. (NASDAQ:MEDP), Integra Lifesciences Holdings Corp (NASDAQ:IART), Agora, Inc. (NASDAQ:API), and Primerica, Inc. (NYSE:PRI). This group of stocks’ market values match LPX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CFX 49 1009256 13
NYCB 25 329163 0
MSA 17 29716 4
MEDP 21 265560 -4
IART 13 96207 0
API 17 739743 3
PRI 20 498557 -11
Average 23.1 424029 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $772 million in LPX’s case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand Integra Lifesciences Holdings Corp (NASDAQ:IART) is the least popular one with only 13 bullish hedge fund positions. Louisiana-Pacific Corporation (NYSE:LPX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LPX is 39.6. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately LPX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LPX were disappointed as the stock returned 9.2% since the end of March (through 7/2) 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.