In this article we will take a look at whether hedge funds think LKQ Corporation (NASDAQ:LKQ) 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.
Is LKQ a good stock to buy now? LKQ Corporation (NASDAQ:LKQ) has seen an increase in hedge fund interest lately. LKQ Corporation (NASDAQ:LKQ) was in 51 hedge funds’ portfolios at the end of September. The all time high for this statistics is 52. There were 44 hedge funds in our database with LKQ holdings at the end of June. Our calculations also showed that LKQ 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.
At the moment there are many metrics investors employ to grade stocks. Two of the most underrated metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the S&P 500 by a superb margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind let’s take a look at the fresh hedge fund action surrounding LKQ Corporation (NASDAQ:LKQ).
What have hedge funds been doing with LKQ Corporation (NASDAQ:LKQ)?
At the end of the third quarter, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in LKQ a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, ValueAct Capital held the most valuable stake in LKQ Corporation (NASDAQ:LKQ), which was worth $597.5 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $120.9 million worth of shares. Sachem Head Capital, International Value Advisers, and AQR Capital Management 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 Clearfield Capital allocated the biggest weight to LKQ Corporation (NASDAQ:LKQ), around 15.2% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, setting aside 8.73 percent of its 13F equity portfolio to LKQ.
Now, specific money managers have been driving this bullishness. Renaissance Technologies, created the biggest position in LKQ Corporation (NASDAQ:LKQ). Renaissance Technologies had $14.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $3.3 million investment in the stock during the quarter. The other funds with brand new LKQ positions are Qing Li’s Sciencast Management, David Harding’s Winton Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LKQ Corporation (NASDAQ:LKQ) but similarly valued. These stocks are NiSource Inc. (NYSE:NI), Formula One Group (NASDAQ:FWONK), Henry Schein, Inc. (NASDAQ:HSIC), Pinnacle West Capital Corporation (NYSE:PNW), China Southern Airlines Co Ltd (NYSE:ZNH), Formula One Group (NASDAQ:FWONA), and Trex Company, Inc. (NYSE:TREX). This group of stocks’ market caps are closest to LKQ’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $566 million. That figure was $1385 million in LKQ’s case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks LKQ Corporation (NASDAQ:LKQ) is more popular among hedge funds. Our overall hedge fund sentiment score for LKQ is 89.4. 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. 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 returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on LKQ as the stock returned 29.2% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.