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Hedge Funds Are Buying On Landec Corporation (LNDC)

In this article you are going to find out whether hedge funds think Landec Corporation (NASDAQ:LNDC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Landec Corporation (NASDAQ:LNDC) was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. LNDC shareholders have witnessed an increase in hedge fund sentiment of late. There were 12 hedge funds in our database with LNDC positions at the end of the previous quarter. Our calculations also showed that LNDC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Christopher S. Kiper Legion Partners Asset Management

Christopher Kiper of Legion Partners Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the key hedge fund action encompassing Landec Corporation (NASDAQ:LNDC).

What have hedge funds been doing with Landec Corporation (NASDAQ:LNDC)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LNDC over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Wynnefield Capital was the largest shareholder of Landec Corporation (NASDAQ:LNDC), with a stake worth $24.9 million reported as of the end of September. Trailing Wynnefield Capital was Legion Partners Asset Management, which amassed a stake valued at $20.7 million. Harbert Management, AltraVue Capital, and Royce & Associates 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 Wynnefield Capital allocated the biggest weight to Landec Corporation (NASDAQ:LNDC), around 23.66% of its 13F portfolio. Legion Partners Asset Management is also relatively very bullish on the stock, designating 8.73 percent of its 13F equity portfolio to LNDC.

Consequently, key money managers have jumped into Landec Corporation (NASDAQ:LNDC) headfirst. Millennium Management, managed by Israel Englander, initiated the most outsized position in Landec Corporation (NASDAQ:LNDC). Millennium Management had $0.8 million invested in the company at the end of the quarter. Jeffrey Bronchick’s Cove Street Capital also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies and Greg Eisner’s Engineers Gate Manager.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Landec Corporation (NASDAQ:LNDC) but similarly valued. We will take a look at Gladstone Land Corporation (NASDAQ:LAND), Personalis, Inc. (NASDAQ:PSNL), iRadimed Corporation (NASDAQ:IRMD), and Catasys, Inc. (NASDAQ:CATS). This group of stocks’ market caps match LNDC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAND 8 9231 1
PSNL 5 7405 -5
IRMD 14 32146 2
CATS 8 6175 2
Average 8.75 13739 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $58 million in LNDC’s case. iRadimed Corporation (NASDAQ:IRMD) is the most popular stock in this table. On the other hand Personalis, Inc. (NASDAQ:PSNL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Landec Corporation (NASDAQ:LNDC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately LNDC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LNDC were disappointed as the stock returned 12.5% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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