At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Lamar Advertising Company (NASDAQ:LAMR) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Lamar Advertising Company (NASDAQ:LAMR) the right investment to pursue these days? Hedge funds were taking a bullish view. The number of bullish hedge fund bets moved up by 10 lately. Lamar Advertising Company (NASDAQ:LAMR) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LAMR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
To most stock holders, hedge funds are perceived as slow, outdated investment vehicles of years past. While there are over 8000 funds in operation at present, Our researchers choose to focus on the leaders of this club, approximately 850 funds. These investment experts handle most of the smart money’s total asset base, and by tailing their best equity investments, Insider Monkey has discovered several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a glance at the recent hedge fund action surrounding Lamar Advertising Company (NASDAQ:LAMR).
What does smart money think about Lamar Advertising Company (NASDAQ:LAMR)?
At the end of June, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in LAMR a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Lamar Advertising Company (NASDAQ:LAMR), with a stake worth $82.5 million reported as of the end of September. Trailing Select Equity Group was SQN Investors, which amassed a stake valued at $50 million. Citadel Investment Group, Renaissance Technologies, and Jericho Capital Asset 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 LFL Advisers allocated the biggest weight to Lamar Advertising Company (NASDAQ:LAMR), around 10.06% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, dishing out 3.87 percent of its 13F equity portfolio to LAMR.
As one would reasonably expect, key money managers were leading the bulls’ herd. SQN Investors, managed by Amish Mehta, established the most valuable position in Lamar Advertising Company (NASDAQ:LAMR). SQN Investors had $50 million invested in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also initiated a $35.5 million position during the quarter. The other funds with new positions in the stock are Richard Mashaal’s Rima Senvest Management, James Dinan’s York Capital Management, 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 Lamar Advertising Company (NASDAQ:LAMR) but similarly valued. We will take a look at Interpublic Group of Companies Inc (NYSE:IPG), American Airlines Group Inc (NASDAQ:AAL), RealPage, Inc. (NASDAQ:RP), Commerce Bancshares, Inc. (NASDAQ:CBSH), Dolby Laboratories, Inc. (NYSE:DLB), UGI Corp (NYSE:UGI), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market caps match LAMR’s market cap.
|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 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $420 million in LAMR’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 16 bullish hedge fund positions. Lamar Advertising Company (NASDAQ:LAMR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LAMR is 85.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LAMR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LAMR were disappointed as the stock returned 3.7% 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 10 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.