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Hedge Funds Are Selling LG Display Co Ltd. (LPL)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is LG Display Co Ltd. (NYSE:LPL), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

LG Display Co Ltd. (NYSE:LPL) was in 6 hedge funds’ portfolios at the end of the third quarter of 2018. LPL investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with LPL positions at the end of the previous quarter. Our calculations also showed that LPL isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

CITADEL INVESTMENT GROUP

We’re going to take a look at the recent hedge fund action regarding LG Display Co Ltd. (NYSE:LPL).

What have hedge funds been doing with LG Display Co Ltd. (NYSE:LPL)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in LPL heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds LPL Positions

More specifically, LMR Partners was the largest shareholder of LG Display Co Ltd. (NYSE:LPL), with a stake worth $23 million reported as of the end of September. Trailing LMR Partners was Highbridge Capital Management, which amassed a stake valued at $1.7 million. Millennium Management, Citadel Investment Group, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as LG Display Co Ltd. (NYSE:LPL) has faced bearish sentiment from the smart money, we can see that there is a sect of money managers that elected to cut their full holdings in the third quarter. Intriguingly, Jim Simons’s Renaissance Technologies cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $1.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LG Display Co Ltd. (NYSE:LPL) but similarly valued. We will take a look at United Microelectronics Corp (NYSE:UMC), Dunkin Brands Group Inc (NASDAQ:DNKN), RealPage, Inc. (NASDAQ:RP), and Reliance Steel & Aluminum Co. (NYSE:RS). This group of stocks’ market valuations are similar to LPL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UMC 17 91798 5
DNKN 12 29779 1
RP 27 424040 -1
RS 27 374418 3
Average 20.75 230009 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $28 million in LPL’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Dunkin Brands Group Inc (NASDAQ:DNKN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks LG Display Co Ltd. (NYSE:LPL) is even less popular than DNKN. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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