In this article we will take a look at whether hedge funds think Liquidity Services, Inc. (NASDAQ:LQDT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Liquidity Services, Inc. (NASDAQ:LQDT) has experienced a decrease in hedge fund interest recently. Our calculations also showed that LQDT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the new hedge fund action encompassing Liquidity Services, Inc. (NASDAQ:LQDT).
How are hedge funds trading Liquidity Services, Inc. (NASDAQ:LQDT)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LQDT over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Liquidity Services, Inc. (NASDAQ:LQDT), with a stake worth $9.2 million reported as of the end of September. Trailing Renaissance Technologies was Roumell Asset Management, which amassed a stake valued at $4.3 million. Harvey Partners, Arrowstreet Capital, and Two Sigma Advisors 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 Roumell Asset Management allocated the biggest weight to Liquidity Services, Inc. (NASDAQ:LQDT), around 11.88% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 3.22 percent of its 13F equity portfolio to LQDT.
Seeing as Liquidity Services, Inc. (NASDAQ:LQDT) has faced declining sentiment from the smart money, we can see that there were a few hedgies who were dropping their entire stakes heading into Q4. It’s worth mentioning that David Harding’s Winton Capital Management said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $0.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Liquidity Services, Inc. (NASDAQ:LQDT). We will take a look at Sierra Metals Inc. (NYSE:SMTS), Level One Bancorp, Inc. (NASDAQ:LEVL), Iteris Inc (NYSE:ITI), and Brainstorm Cell Therapeutics Inc. (NASDAQ:BCLI). All of these stocks’ market caps are closest to LQDT’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 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $18 million in LQDT’s case. Iteris Inc (NYSE:ITI) is the most popular stock in this table. On the other hand Sierra Metals Inc. (NYSE:SMTS) is the least popular one with only 1 bullish hedge fund positions. Liquidity Services, Inc. (NASDAQ:LQDT) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on LQDT as the stock returned 56.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.