Is L Brands (LB) Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think L Brands Inc (NYSE:LB) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is LB stock a buy or sell? L Brands Inc (NYSE:LB) has seen an increase in hedge fund interest in recent months. L Brands Inc (NYSE:LB) was in 52 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the 21st century investor’s toolkit there are several indicators investors can use to appraise stocks. Two of the most useful indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top money managers can outclass the broader indices by a significant margin (see the details here).


Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). With all of this in mind we’re going to go over the fresh hedge fund action encompassing L Brands Inc (NYSE:LB).

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

At Q4’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LB over the last 22 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Lone Pine Capital held the most valuable stake in L Brands Inc (NYSE:LB), which was worth $976.8 million at the end of the fourth quarter. On the second spot was Melvin Capital Management which amassed $731.3 million worth of shares. Egerton Capital Limited, Coatue Management, and Steadfast Capital 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 Barington Capital Group allocated the biggest weight to L Brands Inc (NYSE:LB), around 26.95% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, dishing out 15.82 percent of its 13F equity portfolio to LB.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Junto Capital Management, managed by James Parsons, created the most outsized position in L Brands Inc (NYSE:LB). Junto Capital Management had $22.8 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also initiated a $20.8 million position during the quarter. The other funds with new positions in the stock are Brad Stephens’s Six Columns Capital, Joseph Samuels’s Islet Management, and Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to L Brands Inc (NYSE:LB). We will take a look at Host Hotels and Resorts Inc (NASDAQ:HST), Banco de Chile (NYSE:BCH), ICON Public Limited Company (NASDAQ:ICLR), China Eastern Airlines Corp. Ltd. (NYSE:CEA), The Toro Company (NYSE:TTC), Anaplan, Inc. (NYSE:PLAN), and CBOE Global Markets Inc (NASDAQ:CBOE). This group of stocks’ market valuations are similar to LB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HST 22 127294 1
BCH 3 48096 -1
ICLR 29 646187 5
CEA 1 1005 1
TTC 31 1004514 -1
PLAN 63 3062296 8
CBOE 38 859817 5
Average 26.7 821316 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $821 million. That figure was $3909 million in LB’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. L Brands Inc (NYSE:LB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LB is 81.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LB as the stock returned 62.8% since the end of Q4 (through 3/19) 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.