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 LivePerson, Inc. (NASDAQ:LPSN) and determine whether hedge funds had an edge regarding this stock.
LivePerson, Inc. (NASDAQ:LPSN) investors should be aware of an increase in enthusiasm from smart money recently. LivePerson, Inc. (NASDAQ:LPSN) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 15 hedge funds in our database with LPSN holdings at the end of March. Our calculations also showed that LPSN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 eyes of most traders, hedge funds are assumed to be underperforming, old investment vehicles of the past. While there are more than 8000 funds with their doors open today, Our experts hone in on the leaders of this club, around 850 funds. It is estimated that this group of investors handle the majority of all hedge funds’ total capital, and by tailing their matchless stock picks, Insider Monkey has uncovered several investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the recent hedge fund action regarding LivePerson, Inc. (NASDAQ:LPSN).
What does smart money think about LivePerson, Inc. (NASDAQ:LPSN)?
At second quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in LPSN over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in LivePerson, Inc. (NASDAQ:LPSN) was held by RGM Capital, which reported holding $72 million worth of stock at the end of September. It was followed by Jericho Capital Asset Management with a $40 million position. Other investors bullish on the company included Shellback Capital, GLG Partners, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position RGM Capital allocated the biggest weight to LivePerson, Inc. (NASDAQ:LPSN), around 4.34% of its 13F portfolio. BeaconLight Capital is also relatively very bullish on the stock, earmarking 2.96 percent of its 13F equity portfolio to LPSN.
As aggregate interest increased, key money managers have jumped into LivePerson, Inc. (NASDAQ:LPSN) headfirst. Jericho Capital Asset Management, managed by Josh Resnick, created the biggest position in LivePerson, Inc. (NASDAQ:LPSN). Jericho Capital Asset Management had $40 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also initiated a $24 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Ed Bosek’s BeaconLight Capital, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks similar to LivePerson, Inc. (NASDAQ:LPSN). We will take a look at Echostar Corporation (NASDAQ:SATS), WNS (Holdings) Limited (NYSE:WNS), El Paso Electric Company (NYSE:EE), EnerSys (NYSE:ENS), Watts Water Technologies Inc (NYSE:WTS), LiveRamp Holdings, Inc. (NYSE:RAMP), and Plug Power, Inc. (NASDAQ:PLUG). All of these stocks’ market caps resemble LPSN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $220 million in LPSN’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand El Paso Electric Company (NYSE:EE) is the least popular one with only 15 bullish hedge fund positions. LivePerson, Inc. (NASDAQ:LPSN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LPSN is 68.6. 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. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on LPSN as the stock returned 25.5% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.