The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Lincoln National Corporation (NYSE:LNC) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is LNC a good stock to buy? Investors who are in the know were in a bearish mood. The number of bullish hedge fund bets retreated by 4 lately. Lincoln National Corporation (NYSE:LNC) was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 40. Our calculations also showed that LNC 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). There were 34 hedge funds in our database with LNC holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Now let’s take a look at the fresh hedge fund action regarding Lincoln National Corporation (NYSE:LNC).
Do Hedge Funds Think LNC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in LNC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lyrical Asset Management was the largest shareholder of Lincoln National Corporation (NYSE:LNC), with a stake worth $147.3 million reported as of the end of September. Trailing Lyrical Asset Management was Arrowstreet Capital, which amassed a stake valued at $87.9 million. East Side Capital (RR Partners), GLG Partners, and Citadel Investment Group 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 East Side Capital (RR Partners) allocated the biggest weight to Lincoln National Corporation (NYSE:LNC), around 6.26% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, earmarking 2.68 percent of its 13F equity portfolio to LNC.
Due to the fact that Lincoln National Corporation (NYSE:LNC) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Ryan Caldwell’s Chiron Investment Management said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $5.5 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also cut its stock, about $4.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lincoln National Corporation (NYSE:LNC) but similarly valued. These stocks are Voya Financial Inc (NYSE:VOYA), Sealed Air Corporation (NYSE:SEE), Steel Dynamics, Inc. (NASDAQ:STLD), MKS Instruments, Inc. (NASDAQ:MKSI), OGE Energy Corp. (NYSE:OGE), National Retail Properties, Inc. (NYSE:NNN), and Kilroy Realty Corp (NYSE:KRC). This group of stocks’ market caps match LNC’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 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $497 million. That figure was $411 million in LNC’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 16 bullish hedge fund positions. Lincoln National Corporation (NYSE:LNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNC is 44.7. 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 gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on LNC as the stock returned 58.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.