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Hedge Funds Have Never Been More Bullish On Luxfer Holdings PLC (LXFR)

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Luxfer Holdings PLC (NYSE:LXFR).

Is Luxfer Holdings PLC (NYSE:LXFR) a great investment today? Hedge funds are becoming hopeful. The number of long hedge fund positions improved by 4 recently. Our calculations also showed that LXFR isn’t among the 30 most popular stocks among hedge funds. LXFR was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 8 hedge funds in our database with LXFR positions at the end of the previous quarter.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus

We’re going to go over the key hedge fund action regarding Luxfer Holdings PLC (NYSE:LXFR).

How are hedge funds trading Luxfer Holdings PLC (NYSE:LXFR)?

Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LXFR over the last 14 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

LXFR_may2019

When looking at the institutional investors followed by Insider Monkey, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the most valuable position in Luxfer Holdings PLC (NYSE:LXFR). Nantahala Capital Management has a $46.5 million position in the stock, comprising 1.4% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, managed by Jim Simons, which holds a $15.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Chuck Royce’s Royce & Associates, Paul Marshall and Ian Wace’s Marshall Wace LLP and Richard Driehaus’s Driehaus Capital.

As one would reasonably expect, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Luxfer Holdings PLC (NYSE:LXFR). Marshall Wace LLP had $3.6 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $2.4 million position during the quarter. The following funds were also among the new LXFR investors: D. E. Shaw’s D E Shaw, James Dondero’s Highland Capital Management, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks similar to Luxfer Holdings PLC (NYSE:LXFR). These stocks are Insteel Industries Inc (NASDAQ:IIIN), MYR Group Inc (NASDAQ:MYRG), HCI Group, Inc. (NYSE:HCI), and Osiris Therapeutics, Inc. (NASDAQ:OSIR). This group of stocks’ market values resemble LXFR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IIIN 12 58512 -4
MYRG 12 17972 1
HCI 9 29871 2
OSIR 8 11044 4
Average 10.25 29350 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $79 million in LXFR’s case. Insteel Industries Inc (NASDAQ:IIIN) is the most popular stock in this table. On the other hand Osiris Therapeutics, Inc. (NASDAQ:OSIR) is the least popular one with only 8 bullish hedge fund positions. Luxfer Holdings PLC (NYSE:LXFR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on LXFR as the stock returned 44.4% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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