Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Lear Corporation (NYSE:LEA).
Lear Corporation (NYSE:LEA) has experienced a decrease in hedge fund sentiment lately. LEA was in 32 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with LEA holdings at the end of the previous quarter. At the end of this article we will also compare LEA to other stocks including Teck Resources Ltd (USA) (NYSE:TCK), Torchmark Corporation (NYSE:TMK), and National Retail Properties, Inc. (NYSE:NNN) to get a better sense of its popularity.
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, let’s go over the recent action surrounding Lear Corporation (NYSE:LEA).
How are hedge funds trading Lear Corporation (NYSE:LEA)?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 9% decline from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Lear Corporation (NYSE:LEA). AQR Capital Management has a $304.4 million position in the stock. The second most bullish fund manager is Robert Polak of Anchor Bolt Capital, with a $136.9 million position; 4.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish encompass Ken Griffin’s Citadel Investment Group, Joel Greenblatt’s Gotham Asset Management and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Seeing as Lear Corporation (NYSE:LEA) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that slashed their full holdings in the third quarter. Intriguingly, Malcolm Fairbairn’s Ascend Capital said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $2.7 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $2.5 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Lear Corporation (NYSE:LEA). These stocks are Teck Resources Ltd (USA) (NYSE:TCK), Torchmark Corporation (NYSE:TMK), National Retail Properties, Inc. (NYSE:NNN), and Msci Inc (NYSE:MSCI). This group of stocks’ market valuations resemble LEA’s market valuation.
|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 24 hedge funds with bullish positions and the average amount invested in these stocks was $475 million. That figure was $709 million in LEA’s case. Teck Resources Ltd (USA) (NYSE:TCK) is the most popular stock in this table. On the other hand Torchmark Corporation (NYSE:TMK) is the least popular one with only 19 bullish hedge fund positions. Lear Corporation (NYSE:LEA) 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. In this regard TCK might be a better candidate to consider a long position in, with a positive influx of six hedge funds in Q3.