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Is LG Display Co Ltd. (LPL) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like LG Display Co Ltd. (NYSE:LPL).

Hedge fund interest in LG Display Co Ltd. (NYSE:LPL) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare LPL to other stocks including Deckers Outdoor Corporation (NYSE:DECK), Wyndham Destinations, Inc. (NYSE:WYND), and Perspecta Inc. (NYSE:PRSP) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the new hedge fund action surrounding LG Display Co Ltd. (NYSE:LPL).

How are hedge funds trading LG Display Co Ltd. (NYSE:LPL)?

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in LPL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with LPL Positions

More specifically, Arrowstreet Capital was the largest shareholder of LG Display Co Ltd. (NYSE:LPL), with a stake worth $7.4 million reported as of the end of September. Trailing Arrowstreet Capital was LMR Partners, which amassed a stake valued at $1.7 million. Citadel Investment Group was 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 LMR Partners allocated the biggest weight to LG Display Co Ltd. (NYSE:LPL), around 0.09% of its portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to LPL.

Due to the fact that LG Display Co Ltd. (NYSE:LPL) has experienced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who were dropping their entire stakes in the third quarter. Intriguingly, Israel Englander’s Millennium Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.3 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LG Display Co Ltd. (NYSE:LPL) but similarly valued. We will take a look at Deckers Outdoor Corporation (NYSE:DECK), Wyndham Destinations, Inc. (NYSE:WYND), Perspecta Inc. (NYSE:PRSP), and Service Properties Trust (NASDAQ:SVC). This group of stocks’ market valuations are similar to LPL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DECK 26 415436 1
WYND 21 521654 -1
PRSP 40 719169 0
SVC 13 48463 0
Average 25 426181 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $426 million. That figure was $9 million in LPL’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Service Properties Trust (NASDAQ:SVC) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks LG Display Co Ltd. (NYSE:LPL) is even less popular than SVC. Hedge funds dodged a bullet by taking a bearish stance towards LPL. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately LPL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LPL investors were disappointed as the stock returned -5% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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