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

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Life Storage, Inc. (NYSE:LSI) in this article.

Life Storage, Inc. (NYSE:LSI) has experienced an increase in support from the world’s most elite money managers recently. Life Storage, Inc. (NYSE:LSI) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LSI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Ken Heebner of Capital Growth Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to check out the recent hedge fund action encompassing Life Storage, Inc. (NYSE:LSI).

Do Hedge Funds Think LSI Is A Good Stock To Buy Now?

At first quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LSI over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Life Storage, Inc. (NYSE:LSI), worth close to $58.8 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $33.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Dmitry Balyasny’s Balyasny Asset Management, Ken Heebner’s Capital Growth Management and Daniel Johnson’s Gillson Capital. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Life Storage, Inc. (NYSE:LSI), around 1.49% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 1.09 percent of its 13F equity portfolio to LSI.

As aggregate interest increased, some big names have been driving this bullishness. Intrinsic Edge Capital, managed by Mark Coe, initiated the largest position in Life Storage, Inc. (NYSE:LSI). Intrinsic Edge Capital had $9.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $5.6 million position during the quarter. The other funds with brand new LSI positions are D. E. Shaw’s D E Shaw, Andrew Weiss’s Weiss Asset Management, and Thomas Bailard’s Bailard Inc.

Let’s go over hedge fund activity in other stocks similar to Life Storage, Inc. (NYSE:LSI). We will take a look at OGE Energy Corp. (NYSE:OGE), JetBlue Airways Corporation (NASDAQ:JBLU), Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), Pacific Biosciences of California, Inc. (NASDAQ:PACB), FirstService Corporation (NASDAQ:FSV), Huntsman Corporation (NYSE:HUN), and eXp World Holdings, Inc. (NASDAQ:EXPI). This group of stocks’ market caps are closest to LSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OGE 23 119911 3
JBLU 29 425689 0
RBA 19 345121 -4
PACB 24 1492893 1
FSV 17 238970 1
HUN 35 735950 6
EXPI 15 171695 -5
Average 23.1 504318 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $504 million. That figure was $215 million in LSI’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand eXp World Holdings, Inc. (NASDAQ:EXPI) is the least popular one with only 15 bullish hedge fund positions. Life Storage, Inc. (NYSE:LSI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LSI is 67.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on LSI as the stock returned 33.7% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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