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Hedge Funds Have Never Been More Bullish On Life Storage, Inc. (LSI)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Life Storage, Inc. (NYSE:LSI).

Is Life Storage, Inc. (NYSE:LSI) a buy here? Prominent investors are getting more bullish. The number of long hedge fund bets inched up by 2 recently. Our calculations also showed that LSI 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 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 S&P 500 ETFs by 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 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.

Richard Driehaus of Driehaus Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 we’re going to view the fresh hedge fund action encompassing Life Storage, Inc. (NYSE:LSI).

Hedge fund activity in Life Storage, Inc. (NYSE:LSI)

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in LSI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LSI A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Life Storage, Inc. (NYSE:LSI), with a stake worth $54.2 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $36 million. Marshall Wace LLP, Winton Capital Management, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Life Storage, Inc. (NYSE:LSI), around 0.39% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to LSI.

As industrywide interest jumped, key money managers have been driving this bullishness. Zimmer Partners, managed by Stuart J. Zimmer, initiated the largest position in Life Storage, Inc. (NYSE:LSI). Zimmer Partners had $1.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.1 million investment in the stock during the quarter. The other funds with brand new LSI positions are Mark Coe’s Intrinsic Edge Capital, Richard Driehaus’s Driehaus Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Life Storage, Inc. (NYSE:LSI) but similarly valued. We will take a look at ONE Gas Inc (NYSE:OGS), LHC Group, Inc. (NASDAQ:LHCG), Zions Bancorporation, National Association (NASDAQ:ZION), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market caps match LSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OGS 16 55599 0
LHCG 27 152070 1
ZION 33 112685 -10
OSK 22 214910 -6
Average 24.5 133816 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $156 million in LSI’s case. Zions Bancorporation, National Association (NASDAQ:ZION) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 16 bullish hedge fund positions. Life Storage, Inc. (NYSE:LSI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately LSI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LSI investors were disappointed as the stock returned 6.8% during the second quarter 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 in 2020.

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