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Is LCI Industries (LCII) Going to Burn These Hedge Funds?

In this article we will take a look at whether hedge funds think LCI Industries (NYSE:LCII) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

LCI Industries (NYSE:LCII) shareholders have witnessed a decrease in hedge fund interest of late. Our calculations also showed that LCII isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most investors, hedge funds are perceived as worthless, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation today, Our researchers hone in on the moguls of this group, approximately 850 funds. These money managers orchestrate the majority of the hedge fund industry’s total capital, and by tailing their top investments, Insider Monkey has brought to light a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding LCI Industries (NYSE:LCII).

How are hedge funds trading LCI Industries (NYSE:LCII)?

Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LCII over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is LCII A Good Stock To Buy?

More specifically, Royce & Associates was the largest shareholder of LCI Industries (NYSE:LCII), with a stake worth $46.8 million reported as of the end of September. Trailing Royce & Associates was Brigade Capital, which amassed a stake valued at $14 million. Motley Fool Asset Management, Citadel Investment Group, and Intrinsic Edge Capital 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 Value Holdings LP allocated the biggest weight to LCI Industries (NYSE:LCII), around 1.07% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, setting aside 0.88 percent of its 13F equity portfolio to LCII.

Since LCI Industries (NYSE:LCII) has faced declining sentiment from hedge fund managers, logic holds that there is a sect of hedgies that elected to cut their entire stakes last quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners sold off the largest investment of the 750 funds tracked by Insider Monkey, worth about $2.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $1.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to LCI Industries (NYSE:LCII). These stocks are Moog Inc (NYSE:MOG), Atlas Corp. (NYSE:ATCO), CVR Energy, Inc. (NYSE:CVI), and Federal Signal Corporation (NYSE:FSS). This group of stocks’ market values are closest to LCII’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MOG 20 68438 -1
ATCO 13 794664 -2
CVI 19 1243640 -12
FSS 15 53758 -3
Average 16.75 540125 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $78 million in LCII’s case. Moog Inc (NYSE:MOG) is the most popular stock in this table. On the other hand Atlas Corp. (NYSE:ATCO) is the least popular one with only 13 bullish hedge fund positions. LCI Industries (NYSE:LCII) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on LCII as the stock returned 71.3% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.