Is LMND A Good Stock To Buy Now?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Lemonade, Inc. (NYSE:LMND).

Is LMND a good stock to buy now? The smart money was becoming hopeful. The number of bullish hedge fund positions went up by 15 recently. Lemonade, Inc. (NYSE:LMND) was in 15 hedge funds’ portfolios at the end of September. Our calculations also showed that LMND 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.

If you’d ask most stock holders, hedge funds are seen as unimportant, old investment tools of yesteryear. While there are more than 8000 funds trading at present, We look at the top tier of this club, approximately 850 funds. These hedge fund managers orchestrate the lion’s share of the hedge fund industry’s total capital, and by shadowing their matchless investments, Insider Monkey has formulated many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Och-Ziff Capital Management

Daniel Och, Founder of OZ Management

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 15 best blue chip stocks 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. Now let’s analyze the new hedge fund action regarding Lemonade, Inc. (NYSE:LMND).

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

At third quarter’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15 from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LMND over the last 21 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.

Is LMND A Good Stock To Buy?

Among these funds, Thrive Capital held the most valuable stake in Lemonade, Inc. (NYSE:LMND), which was worth $54.8 million at the end of the third quarter. On the second spot was Zevenbergen Capital Investments which amassed $22.6 million worth of shares. OZ Management, Foxhaven Asset Management, 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 Thrive Capital allocated the biggest weight to Lemonade, Inc. (NYSE:LMND), around 11.86% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, setting aside 0.45 percent of its 13F equity portfolio to LMND.

As industrywide interest jumped, key hedge funds have jumped into Lemonade, Inc. (NYSE:LMND) headfirst. Thrive Capital, managed by Joshua Kushner, created the biggest position in Lemonade, Inc. (NYSE:LMND). Thrive Capital had $54.8 million invested in the company at the end of the quarter. Nancy Zevenbergen’s Zevenbergen Capital Investments also made a $22.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Daniel S. Och’s OZ Management, Michael Pausic’s Foxhaven Asset Management, and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Lemonade, Inc. (NYSE:LMND). These stocks are Hexcel Corporation (NYSE:HXL), Radian Group Inc (NYSE:RDN), Triton International Limited (NYSE:TRTN), Select Medical Holdings Corporation (NYSE:SEM), Laureate Education, Inc. (NASDAQ:LAUR), United Bankshares, Inc. (NASDAQ:UBSI), and FireEye Inc (NASDAQ:FEYE). This group of stocks’ market values match LMND’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HXL 20 176457 2
RDN 38 300642 5
TRTN 16 164268 2
SEM 22 114598 0
LAUR 25 225833 -6
UBSI 19 39243 3
FEYE 28 162203 0
Average 24 169035 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $110 million in LMND’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Triton International Limited (NYSE:TRTN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Lemonade, Inc. (NYSE:LMND) is even less popular than TRTN. Our overall hedge fund sentiment score for LMND is 10. 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. Hedge funds clearly dropped the ball on LMND as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on LMND as the stock returned 85% since Q3 (through December 14th) and outperformed the market by an even larger margin.

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