How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Lakeland Financial Corporation (NASDAQ:LKFN).
Hedge fund interest in Lakeland Financial Corporation (NASDAQ:LKFN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LKFN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare LKFN to other stocks including Materion Corp (NYSE:MTRN), EverQuote, Inc. (NASDAQ:EVER), and Avidity Biosciences, Inc. (NASDAQ:RNA) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. 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 website. With all of this in mind we’re going to review the latest hedge fund action regarding Lakeland Financial Corporation (NASDAQ:LKFN).
Hedge fund activity in Lakeland Financial Corporation (NASDAQ:LKFN)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in LKFN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Lakeland Financial Corporation (NASDAQ:LKFN), which was worth $7.8 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.9 million worth of shares. Citadel Investment Group, PEAK6 Capital Management, and AQR 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 Winton Capital Management allocated the biggest weight to Lakeland Financial Corporation (NASDAQ:LKFN), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to LKFN.
Since Lakeland Financial Corporation (NASDAQ:LKFN) has experienced falling interest from hedge fund managers, it’s safe to say that there exists a select few hedge funds who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $0.4 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Lakeland Financial Corporation (NASDAQ:LKFN). We will take a look at Materion Corp (NYSE:MTRN), EverQuote, Inc. (NASDAQ:EVER), Avidity Biosciences, Inc. (NASDAQ:RNA), Genetron Holdings Limited (NASDAQ:GTH), NANO-X IMAGING LTD (NASDAQ:NNOX), Lindsay Corporation (NYSE:LNN), and Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT). This group of stocks’ market valuations are similar to LKFN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTRN | 14 | 81395 | 0 |
| EVER | 21 | 178745 | -2 |
| RNA | 17 | 311619 | -7 |
| GTH | 12 | 99741 | -4 |
| NNOX | 6 | 23654 | 6 |
| LNN | 16 | 161024 | 5 |
| ARCT | 20 | 171723 | -1 |
| Average | 15.1 | 146843 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $10 million in LKFN’s case. EverQuote, Inc. (NASDAQ:EVER) is the most popular stock in this table. On the other hand NANO-X IMAGING LTD (NASDAQ:NNOX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Lakeland Financial Corporation (NASDAQ:LKFN) is even less popular than NNOX. Our overall hedge fund sentiment score for LKFN is 17.5. 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. Hedge funds clearly dropped the ball on LKFN 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on LKFN as the stock returned 30.5% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
