Hedge Funds Are Dipping Their Toes Into Open Lending Corporation (LPRO)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Open Lending Corporation (NASDAQ:LPRO) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Open Lending Corporation (NASDAQ:LPRO) has seen an increase in hedge fund sentiment of late. Open Lending Corporation (NASDAQ:LPRO) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LPRO 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.

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 58 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.


Louis Bacon Moore of Moore Capital

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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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 let’s take a look at the key hedge fund action surrounding Open Lending Corporation (NASDAQ:LPRO).

What have hedge funds been doing with Open Lending Corporation (NASDAQ:LPRO)?

Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in LPRO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Open Lending Corporation (NASDAQ:LPRO) was held by Moore Global Investments, which reported holding $43.8 million worth of stock at the end of September. It was followed by Crescent Park Management with a $42.3 million position. Other investors bullish on the company included Adage Capital Management, Portolan Capital Management, and Empyrean Capital Partners. In terms of the portfolio weights assigned to each position Crescent Park Management allocated the biggest weight to Open Lending Corporation (NASDAQ:LPRO), around 8.72% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, dishing out 1.81 percent of its 13F equity portfolio to LPRO.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, initiated the most outsized position in Open Lending Corporation (NASDAQ:LPRO). Moore Global Investments had $43.8 million invested in the company at the end of the quarter. Eli Cohen’s Crescent Park Management also initiated a $42.3 million position during the quarter. The other funds with brand new LPRO positions are Phill Gross and Robert Atchinson’s Adage Capital Management, George McCabe’s Portolan Capital Management, and Michael A. Price and Amos Meron’s Empyrean Capital Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Open Lending Corporation (NASDAQ:LPRO) but similarly valued. We will take a look at Southwestern Energy Company (NYSE:SWN), Mack Cali Realty Corp (NYSE:CLI), Chesapeake Utilities Corporation (NYSE:CPK), Frontline Ltd (NYSE:FRO), Karyopharm Therapeutics Inc (NASDAQ:KPTI), Steelcase Inc. (NYSE:SCS), and Marten Transport, Ltd (NASDAQ:MRTN). This group of stocks’ market valuations match LPRO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWN 15 111763 -2
CLI 13 57434 3
CPK 9 20340 2
FRO 12 39536 -12
KPTI 21 575483 0
SCS 22 89186 -1
MRTN 19 63328 3
Average 15.9 136724 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $195 million in LPRO’s case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 9 bullish hedge fund positions. Open Lending Corporation (NASDAQ:LPRO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LPRO is 37. 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 LPRO as the stock returned 68.9% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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