Is Lumentum Holdings Inc (NASDAQ:LITE) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Lumentum Holdings Inc (NASDAQ:LITE) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 42. LITE shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 29 hedge funds in our database with LITE positions at the end of the second quarter. Our calculations also showed that LITE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Matthew Halbower of Pentwater Capital
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 new hedge fund action regarding Lumentum Holdings Inc (NASDAQ:LITE).
Do Hedge Funds Think LITE Is A Good Stock To Buy Now?
At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LITE over the last 25 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, ValueAct Capital held the most valuable stake in Lumentum Holdings Inc (NASDAQ:LITE), which was worth $83.5 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $71.7 million worth of shares. Point72 Asset Management, Citadel Investment Group, and Pentwater Capital 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 Boardman Bay Capital Management allocated the biggest weight to Lumentum Holdings Inc (NASDAQ:LITE), around 6.86% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, designating 6.74 percent of its 13F equity portfolio to LITE.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Lumentum Holdings Inc (NASDAQ:LITE) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Lumentum Holdings Inc (NASDAQ:LITE). Point72 Asset Management had $54 million invested in the company at the end of the quarter. Suraj Parkash Chopra’s Force Hill Capital Management also initiated a $15.6 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.
Let’s check out hedge fund activity in other stocks similar to Lumentum Holdings Inc (NASDAQ:LITE). These stocks are Primerica, Inc. (NYSE:PRI), Allegro MicroSystems, Inc. (NASDAQ:ALGM), Chesapeake Energy Corporation (NYSE:CHK), Landstar System, Inc. (NASDAQ:LSTR), Ardagh Group S.A. (NYSE:ARD), Blueprint Medicines Corporation (NASDAQ:BPMC), and Grupo Aeroportuario del Pacifico (NYSE:PAC). This group of stocks’ market valuations are similar to LITE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRI | 14 | 468979 | -6 |
| ALGM | 14 | 98566 | -3 |
| CHK | 44 | 2174878 | 1 |
| LSTR | 25 | 256357 | 9 |
| ARD | 14 | 154999 | 1 |
| BPMC | 34 | 910776 | -2 |
| PAC | 3 | 88302 | -4 |
| Average | 21.1 | 593265 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $593 million. That figure was $409 million in LITE’s case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 3 bullish hedge fund positions. Lumentum Holdings Inc (NASDAQ:LITE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LITE is 69.2. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately LITE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LITE were disappointed as the stock returned 3.9% since the end of September (through 11/30) 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.
