Is LKQ Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards LKQ Corporation (NASDAQ:LKQ) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is LKQ stock a buy or sell? LKQ Corporation (NASDAQ:LKQ) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. LKQ Corporation (NASDAQ:LKQ) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 52. Our calculations also showed that LKQ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).


Jeffrey Ubben of ValueAct Capital

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

At the end of December, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LKQ over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, ValueAct Capital held the most valuable stake in LKQ Corporation (NASDAQ:LKQ), which was worth $759.3 million at the end of the fourth quarter. On the second spot was Eminence Capital which amassed $155.6 million worth of shares. Sachem Head Capital, Atalan Capital, and International Value Advisers 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 13.33% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, earmarking 11.57 percent of its 13F equity portfolio to LKQ.

Judging by the fact that LKQ Corporation (NASDAQ:LKQ) has faced falling interest from the smart money, logic holds that there is a sect of money managers that decided to sell off their entire stakes last quarter. At the top of the heap, Clint Murray’s Lodge Hill Capital dropped the biggest position of the 750 funds watched by Insider Monkey, valued at about $10.2 million in stock. David Harding’s fund, Winton Capital Management, also dumped its stock, about $0.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to LKQ Corporation (NASDAQ:LKQ). These stocks are Allegion plc (NYSE:ALLE), Lumen Technologies, Inc. (NYSE:LUMN), Advance Auto Parts, Inc. (NYSE:AAP), Zynga Inc (NASDAQ:ZNGA), News Corp (NASDAQ:NWSA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), and Cna Financial Corporation (NYSE:CNA). This group of stocks’ market valuations are closest to LKQ’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALLE 27 845921 -5
LUMN 29 772132 -2
AAP 36 1352541 -6
ZNGA 52 1002909 4
NWSA 32 703034 1
TEVA 26 916076 -7
CNA 16 60793 -1
Average 31.1 807629 -2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $808 million. That figure was $1611 million in LKQ’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Cna Financial Corporation (NYSE:CNA) is the least popular one with only 16 bullish hedge fund positions. LKQ Corporation (NASDAQ:LKQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LKQ is 80.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LKQ as the stock returned 23.2% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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