Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Lazard Ltd (NYSE:LAZ) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. LAZ was in 14 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with LAZ holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tanger Factory Outlet Centers Inc. (NYSE:SKT), TESARO Inc (NASDAQ:TSRO), and ICON plc – Ordinary Shares (NASDAQ:ICLR) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to analyze the recent action surrounding Lazard Ltd (NYSE:LAZ).
What have hedge funds been doing with Lazard Ltd (NYSE:LAZ)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, down 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LAZ over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ariel Investments, led by John W. Rogers, holds the most valuable position in Lazard Ltd (NYSE:LAZ). Ariel Investments has a $237.8 million position in the stock, comprising 2.9% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, led by Ken Fisher, which holds a $66.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Chuck Royce’s Royce & Associates, John Overdeck and David Siegel’s Two Sigma Advisors and Brian Ashford-Russell and Tim Woolley’s Polar Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Lazard Ltd (NYSE:LAZ) has gone through falling interest from the entirety of the hedge funds we track, we can see that there is a sect of funds who sold off their full holdings by the end of the third quarter. Interestingly, Anton Schutz’s Mendon Capital Advisors sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, about $1.7 million worth.
Let’s also examine hedge fund activity in other stocks similar to Lazard Ltd (NYSE:LAZ). We will take a look at Tanger Factory Outlet Centers Inc. (NYSE:SKT), TESARO Inc (NASDAQ:TSRO), ICON plc – Ordinary Shares (NASDAQ:ICLR), and TC Pipelines, LP (NYSE:TCP). All of these stocks’ market caps are similar to LAZ’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $421 million in LAZ’s case. TESARO Inc (NASDAQ:TSRO) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 6 bullish hedge fund positions. Lazard Ltd (NYSE:LAZ) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TSRO might be a better candidate to consider taking a long position in.