Hedge Funds Are Piling Into Livent Corporation (LTHM)

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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Livent Corporation (NYSE:LTHM) and determine whether the smart money was really smart about this stock.

Livent Corporation (NYSE:LTHM) has experienced an increase in hedge fund sentiment recently. Livent Corporation (NYSE:LTHM) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that LTHM 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AlphaOne Capital Partners' Returns, AUM and Holdings

Paul Hondros of AlphaOne 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. Keeping this in mind let’s take a gander at the key hedge fund action regarding Livent Corporation (NYSE:LTHM).

Hedge fund activity in Livent Corporation (NYSE:LTHM)

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LTHM over the last 20 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is LTHM A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Joho Capital, managed by Robert Karr, holds the largest position in Livent Corporation (NYSE:LTHM). Joho Capital has a $13.9 million position in the stock, comprising 4% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $7.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Israel Englander’s Millennium Management, Paul Hondros’s AlphaOne Capital Partners and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Joho Capital allocated the biggest weight to Livent Corporation (NYSE:LTHM), around 3.98% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, dishing out 1.94 percent of its 13F equity portfolio to LTHM.

As one would reasonably expect, key hedge funds have been driving this bullishness. AlphaOne Capital Partners, managed by Paul Hondros, created the most outsized position in Livent Corporation (NYSE:LTHM). AlphaOne Capital Partners had $1.5 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $0.8 million position during the quarter. The other funds with brand new LTHM positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Robert Vincent McHugh’s Jade Capital Advisors, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Livent Corporation (NYSE:LTHM) but similarly valued. These stocks are Central European Media Enterprises Ltd. (NASDAQ:CETV), New Mountain Finance Corp. (NYSE:NMFC), AZZ Incorporated (NYSE:AZZ), Virtus Investment Partners Inc (NASDAQ:VRTS), Granite Construction Incorporated (NYSE:GVA), Herc Holdings Inc. (NYSE:HRI), and Veritex Holdings Inc (NASDAQ:VBTX). All of these stocks’ market caps are similar to LTHM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CETV 12 42389 1
NMFC 10 20587 -3
AZZ 20 56535 3
VRTS 10 57944 -2
GVA 13 34126 -3
HRI 21 352087 4
VBTX 12 32557 3
Average 14 85175 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $32 million in LTHM’s case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand New Mountain Finance Corp. (NYSE:NMFC) is the least popular one with only 10 bullish hedge fund positions. Livent Corporation (NYSE:LTHM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LTHM is 72.7. 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 LTHM as the stock returned 45.6% 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.