The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded L Brands Inc (NYSE:LB) based on those filings.
Is LB a good stock to buy now? L Brands Inc (NYSE:LB) investors should pay attention to an increase in hedge fund interest recently. L Brands Inc (NYSE:LB) was in 45 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 46. Our calculations also showed that LB 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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 gander at the recent hedge fund action surrounding L Brands Inc (NYSE:LB).
Do Hedge Funds Think LB Is A Good Stock To Buy Now?
At the end of September, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LB over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in L Brands Inc (NYSE:LB) was held by Lone Pine Capital, which reported holding $835.5 million worth of stock at the end of September. It was followed by Melvin Capital Management with a $768.8 million position. Other investors bullish on the company included Egerton Capital Limited, Coatue Management, and D E Shaw. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to L Brands Inc (NYSE:LB), around 27.84% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, dishing out 16.25 percent of its 13F equity portfolio to LB.
As one would reasonably expect, key money managers were breaking ground themselves. Coatue Management, managed by Philippe Laffont, established the largest position in L Brands Inc (NYSE:LB). Coatue Management had $214.5 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $50.9 million investment in the stock during the quarter. The following funds were also among the new LB investors: Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management, David Zorub’s Parsifal Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s also examine hedge fund activity in other stocks similar to L Brands Inc (NYSE:LB). We will take a look at The Western Union Company (NYSE:WU), Imperial Oil Limited (NYSE:IMO), Anaplan, Inc. (NYSE:PLAN), ASE Technology Holding Co., Ltd. (NYSE:ASX), RenaissanceRe Holdings Ltd. (NYSE:RNR), Paylocity Holding Corp (NASDAQ:PCTY), and Concho Resources Inc. (NYSE:CXO). This group of stocks’ market values are closest to LB’s market value.
|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 32 hedge funds with bullish positions and the average amount invested in these stocks was $867 million. That figure was $3368 million in LB’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 11 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 76. 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. Hedge funds were also right about betting on LB as the stock returned 28.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.