Hedge Funds Are Warming Up To Lazard Ltd (LAZ)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Lazard Ltd (NYSE:LAZ) and determine whether hedge funds skillfully traded this stock.

Lazard Ltd (NYSE:LAZ) investors should pay attention to an increase in hedge fund sentiment of late. Lazard Ltd (NYSE:LAZ) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. There were 15 hedge funds in our database with LAZ positions at the end of the first quarter. Our calculations also showed that LAZ 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.

To the average investor there are a multitude of gauges stock traders employ to assess stocks. Some of the most useful gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite money managers can outperform the broader indices by a healthy margin (see the details here).

Clifton Robbins Blue Harbour

Clifton S. Robbins of Blue Harbour Group

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 glance at the key hedge fund action surrounding Lazard Ltd (NYSE:LAZ).

How are hedge funds trading Lazard Ltd (NYSE:LAZ)?

At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in LAZ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Lazard Ltd (NYSE:LAZ) was held by Southeastern Asset Management, which reported holding $201 million worth of stock at the end of September. It was followed by Ariel Investments with a $154.5 million position. Other investors bullish on the company included Fisher Asset Management, Royce & Associates, and Hosking Partners. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Lazard Ltd (NYSE:LAZ), around 7.96% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 5.01 percent of its 13F equity portfolio to LAZ.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Yost Capital Management, managed by Carson Yost, established the most outsized position in Lazard Ltd (NYSE:LAZ). Yost Capital Management had $9.3 million invested in the company at the end of the quarter. Clifton S. Robbins’s Blue Harbour Group also made a $6.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Bill Miller’s Miller Value Partners, Michael Gelband’s ExodusPoint Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lazard Ltd (NYSE:LAZ) but similarly valued. These stocks are Proto Labs Inc (NYSE:PRLB), Granite Real Estate Investment Trust (NYSE:GRP), Companhia Energética de Minas Gerais (NYSE:CIG), Gates Industrial Corporation plc (NYSE:GTES), Tenable Holdings, Inc. (NASDAQ:TENB), Ternium S.A. (NYSE:TX), and Community Bank System, Inc. (NYSE:CBU). This group of stocks’ market caps match LAZ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRLB 17 25450 4
GRP 6 17893 2
CIG 9 27400 -1
GTES 10 37036 2
TENB 22 251809 -2
TX 9 74060 1
CBU 15 19895 4
Average 12.6 64792 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $522 million in LAZ’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Lazard Ltd (NYSE:LAZ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LAZ is 70. 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 LAZ as the stock returned 17.2% 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.