Hedge Funds Aren’t Crazy About LPL Financial Holdings Inc (LPLA) Anymore

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of LPL Financial Holdings Inc (NASDAQ:LPLA) based on that data.

LPL Financial Holdings Inc (NASDAQ:LPLA) has seen a decrease in support from the world’s most elite money managers lately. LPLA was in 33 hedge funds’ portfolios at the end of March. There were 41 hedge funds in our database with LPLA holdings at the end of the previous quarter. Our calculations also showed that LPLA 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.

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 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital 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. Now let’s review the new hedge fund action surrounding LPL Financial Holdings Inc (NASDAQ:LPLA).

Hedge fund activity in LPL Financial Holdings Inc (NASDAQ:LPLA)

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LPLA 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Samlyn Capital, managed by Robert Pohly, holds the biggest position in LPL Financial Holdings Inc (NASDAQ:LPLA). Samlyn Capital has a $205.4 million position in the stock, comprising 5.2% of its 13F portfolio. The second most bullish fund manager is John Smith Clark of Southpoint Capital Advisors, with a $104.8 million position; 3.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions contain Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Steve Cohen’s Point72 Asset Management and James Parsons’s Junto Capital Management. In terms of the portfolio weights assigned to each position Samlyn Capital allocated the biggest weight to LPL Financial Holdings Inc (NASDAQ:LPLA), around 5.18% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, dishing out 4.83 percent of its 13F equity portfolio to LPLA.

Judging by the fact that LPL Financial Holdings Inc (NASDAQ:LPLA) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few money managers that decided to sell off their full holdings in the third quarter. Interestingly, Jeffrey Hoffner’s Engle Capital cut the biggest stake of all the hedgies watched by Insider Monkey, valued at close to $55.4 million in stock. Jacob Doft’s fund, Highline Capital Management, also dumped its stock, about $47.6 million worth. These moves are interesting, as total hedge fund interest dropped by 8 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LPL Financial Holdings Inc (NASDAQ:LPLA) but similarly valued. These stocks are Cousins Properties Incorporated (NYSE:CUZ), Signature Bank (NASDAQ:SBNY), JBG SMITH Properties (NYSE:JBGS), and Portland General Electric Company (NYSE:POR). This group of stocks’ market caps match LPLA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CUZ 22 76929 10
SBNY 19 262247 -2
JBGS 20 318961 1
POR 23 247138 -4
Average 21 226319 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $748 million in LPLA’s case. Portland General Electric Company (NYSE:POR) is the most popular stock in this table. On the other hand Signature Bank (NASDAQ:SBNY) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks LPL Financial Holdings Inc (NASDAQ:LPLA) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on LPLA as the stock returned 31.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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