While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Lands’ End, Inc. (NASDAQ:LE).
Is LE a good stock to buy now? Lands’ End, Inc. (NASDAQ:LE) has experienced a decrease in hedge fund interest in recent months. Lands’ End, Inc. (NASDAQ:LE) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that LE 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing Lands’ End, Inc. (NASDAQ:LE).
Do Hedge Funds Think LE Is A Good Stock To Buy Now?
At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LE over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, ESL Investments, managed by Edward Lampert, holds the number one position in Lands’ End, Inc. (NASDAQ:LE). ESL Investments has a $58.6 million position in the stock, comprising 31.6% of its 13F portfolio. On ESL Investments’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $3.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Mario Gabelli’s GAMCO Investors, Dmitry Balyasny’s Balyasny Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position ESL Investments allocated the biggest weight to Lands’ End, Inc. (NASDAQ:LE), around 31.57% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to LE.
Seeing as Lands’ End, Inc. (NASDAQ:LE) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of hedge funds that elected to cut their full holdings heading into Q4. Intriguingly, Scott Stewart Miller’s Greenhaven Road Investment Management sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $3.6 million in stock, and Philippe Laffont’s Coatue Management was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Lands’ End, Inc. (NASDAQ:LE). These stocks are Sabine Royalty Trust (NYSE:SBR), Lindblad Expeditions Holdings Inc (NASDAQ:LIND), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Viking Therapeutics, Inc. (NASDAQ:VKTX), Clarus Corporation (NASDAQ:CLAR), Orchard Therapeutics plc (NASDAQ:ORTX), and Viomi Technology Co., Ltd (NASDAQ:VIOT). This group of stocks’ market valuations resemble LE’s market valuation.
|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 11 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $68 million in LE’s case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP) is the least popular one with only 5 bullish hedge fund positions. Lands’ End, Inc. (NASDAQ:LE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LE is 37.1. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on LE as the stock returned 58% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.