Is LifeVantage Corp (LFVN) Going to Burn These Hedge Funds?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards LifeVantage Corp (NASDAQ:LFVN).

LifeVantage Corp (NASDAQ:LFVN) investors should pay attention to a decrease in hedge fund interest in recent months. LFVN was in 6 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with LFVN holdings at the end of the previous quarter. At the end of this article we will also compare LFVN to other stocks including Noodles & Co (NASDAQ:NDLS), Navios Maritime Holdings Inc. (NYSE:NM), and Eagle Bulk Shipping Inc. (NASDAQ:EGLE) 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.

With all of this in mind, let’s go over the latest action regarding LifeVantage Corp (NASDAQ:LFVN).

What does the smart money think about LifeVantage Corp (NASDAQ:LFVN)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 14% from the second quarter of 2016. By comparison, 2 hedge funds held shares or bullish call options in LFVN heading into this year. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the biggest hedge funds in the world, holds the number one position in LifeVantage Corp (NASDAQ:LFVN). According to regulatory filings, the fund has a $6.5 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is Manatuck Hill Partners, led by Mark Broach, which holds a $4 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. 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.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cashed in their positions entirely. Interestingly, David E. Shaw’s D E Shaw cashed in the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.5 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund cut about $0.4 million worth of LFVN shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LifeVantage Corp (NASDAQ:LFVN) but similarly valued. These stocks are Noodles & Co (NASDAQ:NDLS), Navios Maritime Holdings Inc. (NYSE:NM), Eagle Bulk Shipping Inc. (NASDAQ:EGLE), and Bio-Path Holdings Inc (NASDAQ:BPTH). This group of stocks’ market valuations are closest to LFVN’s market valuation.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $12 million in LFVN’s case. Noodles & Co (NASDAQ:NDLS) is the most popular stock in this table. On the other hand Bio-Path Holdings Inc (NASDAQ:BPTH) is the least popular one with only 1 bullish hedge fund positions. LifeVantage Corp (NASDAQ:LFVN) 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 NDLS might be a better candidate to consider taking a long position in.

Disclosure: none.