It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Lawson Products, Inc. (NASDAQ:LAWS).
Lawson Products, Inc. (NASDAQ:LAWS) has seen an increase in activity from the world’s largest hedge funds in recent months. LAWS was in 7 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with LAWS positions at the end of the previous quarter. Our calculations also showed that LAWS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are perceived as underperforming, old investment tools of the past. While there are more than 8000 funds in operation at present, We choose to focus on the moguls of this group, about 750 funds. Most estimates calculate that this group of people direct the majority of the smart money’s total asset base, and by shadowing their finest equity investments, Insider Monkey has come up with numerous investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the key hedge fund action regarding Lawson Products, Inc. (NASDAQ:LAWS).
Hedge fund activity in Lawson Products, Inc. (NASDAQ:LAWS)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in LAWS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lawson Products, Inc. (NASDAQ:LAWS) was held by GAMCO Investors, which reported holding $7.1 million worth of stock at the end of September. It was followed by Royce & Associates with a $3.7 million position. Other investors bullish on the company included Renaissance Technologies, Winton Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Lawson Products, Inc. (NASDAQ:LAWS), around 0.06% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to LAWS.
Now, key hedge funds have jumped into Lawson Products, Inc. (NASDAQ:LAWS) headfirst. Winton Capital Management, managed by David Harding, assembled the largest position in Lawson Products, Inc. (NASDAQ:LAWS). Winton Capital Management had $1.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Cliff Asness’s AQR Capital Management.
Let’s now review hedge fund activity in other stocks similar to Lawson Products, Inc. (NASDAQ:LAWS). We will take a look at Sterling Construction Company, Inc. (NASDAQ:STRL), Tuscan Holdings Corp. (NASDAQ:THCB), GenMark Diagnostics, Inc (NASDAQ:GNMK), and Dermira Inc (NASDAQ:DERM). This group of stocks’ market values match LAWS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STRL | 12 | 46140 | -2 |
| THCB | 12 | 55008 | 0 |
| GNMK | 15 | 74128 | 1 |
| DERM | 23 | 113476 | 2 |
| Average | 15.5 | 72188 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $16 million in LAWS’s case. Dermira Inc (NASDAQ:DERM) is the most popular stock in this table. On the other hand Sterling Construction Company, Inc. (NASDAQ:STRL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Lawson Products, Inc. (NASDAQ:LAWS) is even less popular than STRL. Hedge funds clearly dropped the ball on LAWS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on LAWS as the stock returned 33.1% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
