Hedge Funds Ditching Loews Corporation (L)

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 Loews Corporation (NYSE:L) based on that data.

Loews Corporation (NYSE:L) has seen a decrease in activity from the world’s largest hedge funds in recent months. L was in 21 hedge funds’ portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with L positions at the end of the previous quarter. Our calculations also showed that L 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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 go over the recent hedge fund action encompassing Loews Corporation (NYSE:L).

Hedge fund activity in Loews Corporation (NYSE:L)

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in L a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in Loews Corporation (NYSE:L) was held by Diamond Hill Capital, which reported holding $63.5 million worth of stock at the end of September. It was followed by Wallace Capital Management with a $17.2 million position. Other investors bullish on the company included Hosking Partners, Levin Capital Strategies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Wallace Capital Management allocated the biggest weight to Loews Corporation (NYSE:L), around 3.31% of its 13F portfolio. DPM Capital is also relatively very bullish on the stock, designating 1.81 percent of its 13F equity portfolio to L.

Because Loews Corporation (NYSE:L) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of funds that decided to sell off their positions entirely in the first quarter. At the top of the heap, D. E. Shaw’s D E Shaw sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $4.7 million in stock. Noam Gottesman’s fund, GLG Partners, also said goodbye to its stock, about $4.1 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Loews Corporation (NYSE:L) but similarly valued. We will take a look at W.P. Carey Inc. (NYSE:WPC), Ventas, Inc. (NYSE:VTR), Godaddy Inc (NYSE:GDDY), and CBOE Global Markets Inc (NASDAQ:CBOE). All of these stocks’ market caps are similar to L’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WPC 22 33963 1
VTR 25 337381 -4
GDDY 54 2247882 3
CBOE 38 780569 11
Average 34.75 849949 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $850 million. That figure was $108 million in L’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand W.P. Carey Inc. (NYSE:WPC) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Loews Corporation (NYSE:L) is even less popular than WPC. Hedge funds dodged a bullet by taking a bearish stance towards L. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 14.8 percentage points. Unfortunately L wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); L investors were disappointed as the stock returned -3.9% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

Follow Loews Corp

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