Is LII A Good Stock To Buy According To Hedge Funds?

At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Lennox International Inc. (NYSE:LII) makes for a good investment right now.

Is LII a good stock to buy? Lennox International Inc. (NYSE:LII) has experienced an increase in support from the world’s most elite money managers of late. Lennox International Inc. (NYSE:LII) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 24 hedge funds in our database with LII positions at the end of the second quarter. Our calculations also showed that LII 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.

Today there are plenty of formulas shareholders can use to size up their stock investments. A pair of the most underrated formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outpace the S&P 500 by a solid margin (see the details here).

Clint Carlson of Carlson Capital

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. With all of this in mind let’s go over the new hedge fund action surrounding Lennox International Inc. (NYSE:LII).

Do Hedge Funds Think LII Is A Good Stock To Buy Now?

At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from the second quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in LII a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is LII A Good Stock To Buy?

Among these funds, Impax Asset Management held the most valuable stake in Lennox International Inc. (NYSE:LII), which was worth $83 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $50.9 million worth of shares. Arrowstreet Capital, Carlson Capital, and GLG Partners 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 Bishop Rock Capital allocated the biggest weight to Lennox International Inc. (NYSE:LII), around 3.81% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 0.73 percent of its 13F equity portfolio to LII.

Consequently, some big names have jumped into Lennox International Inc. (NYSE:LII) headfirst. Carlson Capital, managed by Clint Carlson, initiated the largest position in Lennox International Inc. (NYSE:LII). Carlson Capital had $22.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $15.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Farber’s Atika Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Mark Coe’s Intrinsic Edge Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lennox International Inc. (NYSE:LII) but similarly valued. We will take a look at Enphase Energy Inc (NASDAQ:ENPH), Beyond Meat, Inc. (NASDAQ:BYND), Crown Holdings, Inc. (NYSE:CCK), Packaging Corporation Of America (NYSE:PKG), Apollo Global Management Inc (NYSE:APO), Graco Inc. (NYSE:GGG), and IAC/InterActiveCorp (NASDAQ:IAC). This group of stocks’ market valuations are closest to LII’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENPH 42 1045304 2
BYND 24 393648 -5
CCK 47 1487437 -4
PKG 23 158069 -2
APO 28 1838887 -1
GGG 30 248139 -2
IAC 72 1612704 12
Average 38 969170 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $969 million. That figure was $334 million in LII’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 23 bullish hedge fund positions. Lennox International Inc. (NYSE:LII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LII is 51.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately LII wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LII investors were disappointed as the stock returned 1.8% since the end of September (through 12/18) 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 most of these stocks already outperformed the market in 2020.

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