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Hedge Funds Are Dumping Lennox International Inc. (LII)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Lennox International Inc. (NYSE:LII)?

Is Lennox International Inc. (NYSE:LII) going to take off soon? Investors who are in the know are becoming less confident. The number of long hedge fund positions were cut by 11 recently. Our calculations also showed that LII 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 numerous metrics stock market investors put to use to value stocks. Two of the most useful metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a solid amount (see the details here).

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action surrounding Lennox International Inc. (NYSE:LII).

What does smart money think about Lennox International Inc. (NYSE:LII)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LII over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Lennox International Inc. (NYSE:LII) was held by Impax Asset Management, which reported holding $55.2 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $48.5 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Bishop Rock Capital. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Lennox International Inc. (NYSE:LII), around 2.91% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 0.73 percent of its 13F equity portfolio to LII.

Judging by the fact that Lennox International Inc. (NYSE:LII) has witnessed bearish sentiment from the smart money, we can see that there is a sect of hedge funds who sold off their full holdings heading into Q4. At the top of the heap, Alexander Mitchell’s Scopus Asset Management dumped the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $17.1 million in stock. Bernard Selz’s fund, Selz Capital, also said goodbye to its stock, about $13.2 million worth. These transactions are important to note, as total hedge fund interest fell by 11 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lennox International Inc. (NYSE:LII) but similarly valued. We will take a look at Arconic Corporation (NYSE:ARNC), Carlisle Companies, Inc. (NYSE:CSL), American Homes 4 Rent (NYSE:AMH), and SEI Investments Company (NASDAQ:SEIC). This group of stocks’ market values are closest to LII’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARNC 25 1740220 -18
CSL 23 262658 -3
AMH 21 177852 -2
SEIC 33 254738 4
Average 25.5 608867 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $609 million. That figure was $169 million in LII’s case. SEI Investments Company (NASDAQ:SEIC) is the most popular stock in this table. On the other hand American Homes 4 Rent (NYSE:AMH) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Lennox International Inc. (NYSE:LII) is even less popular than AMH. Hedge funds clearly dropped the ball on LII as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on LII as the stock returned 26.6% so far in the second quarter and outperformed the market by an even larger margin.

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