Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Lowe’s Companies, Inc. (NYSE:LOW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Lowe’s Companies, Inc. (NYSE:LOW) investors should pay attention to an increase in support from the world’s most elite money managers recently. Our calculations also showed that LOW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 41 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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to take a look at the new hedge fund action encompassing Lowe’s Companies, Inc. (NYSE:LOW).
How are hedge funds trading Lowe’s Companies, Inc. (NYSE:LOW)?
At the end of the foruth quarter, a total of 77 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 1% from one quarter earlier. On the other hand, there were a total of 53 hedge funds with a bullish position in LOW 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.
More specifically, D E Shaw was the largest shareholder of Lowe’s Companies, Inc. (NYSE:LOW), with a stake worth $1045.1 million reported as of the end of September. Trailing D E Shaw was Pershing Square, which amassed a stake valued at $1031.5 million. Viking Global, Two Sigma Advisors, and OZ 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 Pershing Square allocated the biggest weight to Lowe’s Companies, Inc. (NYSE:LOW), around 15.74% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, setting aside 9.03 percent of its 13F equity portfolio to LOW.
Consequently, key hedge funds have jumped into Lowe’s Companies, Inc. (NYSE:LOW) headfirst. Suvretta Capital Management, managed by Aaron Cowen, created the most valuable position in Lowe’s Companies, Inc. (NYSE:LOW). Suvretta Capital Management had $142.3 million invested in the company at the end of the quarter. John Khoury’s Long Pond Capital also initiated a $87.4 million position during the quarter. The following funds were also among the new LOW investors: Hyder Ahmad’s Broad Peak Investment Holdings, Jacob Mitchell’s Antipodes Partners, and Louis Bacon’s Moore Global Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lowe’s Companies, Inc. (NYSE:LOW) but similarly valued. We will take a look at Booking Holdings Inc. (NASDAQ:BKNG), Fidelity National Information Services Inc. (NYSE:FIS), Sony Corporation (NYSE:SNE), and Morgan Stanley (NYSE:MS). This group of stocks’ market values are closest to LOW’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.25 hedge funds with bullish positions and the average amount invested in these stocks was $4565 million. That figure was $5413 million in LOW’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Sony Corporation (NYSE:SNE) is the least popular one with only 26 bullish hedge fund positions. Lowe’s Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately LOW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LOW were disappointed as the stock returned -6.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.