We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Lancaster Colony Corporation (NASDAQ:LANC).
Lancaster Colony Corporation (NASDAQ:LANC) investors should pay attention to a decrease in hedge fund interest in recent months. LANC was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 24 hedge funds in our database with LANC positions at the end of the previous quarter. Our calculations also showed that LANC isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing Lancaster Colony Corporation (NASDAQ:LANC).
What does smart money think about Lancaster Colony Corporation (NASDAQ:LANC)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in LANC 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 boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Lancaster Colony Corporation (NASDAQ:LANC), which was worth $94.3 million at the end of the second quarter. On the second spot was Fisher Asset Management which amassed $39.4 million worth of shares. Moreover, AQR Capital Management, Citadel Investment Group, and GLG Partners were also bullish on Lancaster Colony Corporation (NASDAQ:LANC), allocating a large percentage of their portfolios to this stock.
Due to the fact that Lancaster Colony Corporation (NASDAQ:LANC) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that elected to cut their positions entirely heading into Q3. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $1.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks similar to Lancaster Colony Corporation (NASDAQ:LANC). These stocks are Equity Commonwealth (NYSE:EQC), Rayonier Inc. (NYSE:RYN), CarGurus, Inc. (NASDAQ:CARG), and MSA Safety Incorporated (NYSE:MSA). All of these stocks’ market caps are closest to LANC’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 17 hedge funds with bullish positions and the average amount invested in these stocks was $377 million. That figure was $215 million in LANC’s case. Equity Commonwealth (NYSE:EQC) is the most popular stock in this table. On the other hand Rayonier Inc. (NYSE:RYN) is the least popular one with only 14 bullish hedge fund positions. Lancaster Colony Corporation (NASDAQ:LANC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LANC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LANC were disappointed as the stock returned -6.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.