Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the successful funds think of Lloyds Banking Group PLC (ADR) (NYSE:LYG) .
Lloyds Banking Group PLC (ADR) (NYSE:LYG) has experienced an increase in hedge fund interest of late. There were 10 hedge funds in our database with LYG holdings at the end of the previous quarter. There were 11 at the end of Q3. At the end of this article we will also compare LYG to other stocks including BT Group plc (ADR) (NYSE:BT), UBS AG (USA) (NYSE:UBS), and Canadian National Railway (USA) (NYSE:CNI) 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, we’re going to go over the latest action surrounding Lloyds Banking Group PLC (ADR) (NYSE:LYG).
What does the smart money think about Lloyds Banking Group PLC (ADR) (NYSE:LYG)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2016. On the other hand, there were a total of 5 hedge funds with a bullish position in LYG at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s elite fund database, Fisher Asset Management, led by Ken Fisher, holds the biggest position in Lloyds Banking Group PLC (ADR) (NYSE:LYG). Fisher Asset Management has a $308.3 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, holding a $18 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Kenneth Tropin’s Graham Capital Management, J. Alan Reid, Jr.’s Forward Management and Richard Mashaal’s Rima Senvest Management. We should note that Forward Management is 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.
As aggregate interest increased, key money managers were leading the bulls’ herd. Two Sigma Advisors, led by John Overdeck and David Siegel, assembled the largest position in Lloyds Banking Group PLC (ADR) (NYSE:LYG). Two Sigma Advisors had $0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lloyds Banking Group PLC (ADR) (NYSE:LYG) but similarly valued. We will take a look at BT Group plc (ADR) (NYSE:BT), UBS AG (USA) (NYSE:UBS), Canadian National Railway (USA) (NYSE:CNI), and Banco Bradesco SA (ADR) (NYSE:BBD). This group of stocks’ market values match LYG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $637 million. That figure was $335 million in LYG’s case. Canadian National Railway (USA) (NYSE:CNI) is the most popular stock in this table. On the other hand BT Group plc (ADR) (NYSE:BT) is the least popular one with only 7 bullish hedge fund positions. Lloyds Banking Group PLC (ADR) (NYSE:LYG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CNI might be a better candidate to consider taking a long position in.