Is Loews Corporation (L) Going to Burn These Hedge Funds?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Loews Corporation (NYSE:L) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Loews was in 21 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with Loews positions at the end of the previous quarter. At the end of this article we will also compare Loews to other stocks including Magna International Inc. (USA) (NYSE:MGA), United Continental Holdings Inc (NYSE:UAL), and CA, Inc. (NASDAQ:CA) to get a better sense of its popularity.

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How have hedgies been trading Loews Corporation (NYSE:L)?

Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 9% decline from the second quarter of 2016, as hedge fund ownership begins to trend down. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the largest position in Loews Corporation (NYSE:L), worth close to $175.7 million, comprising 1.1% of its total 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $51.2 million position. Some other members of the smart money that are bullish contain Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Scott Wallace’s Wallace Capital Management.

Judging by the fact that Loews Corporation (NYSE:L) has witnessed bearish sentiment from the smart money, logic holds that there were a few hedge funds that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management cut the largest position of the 700 funds watched by Insider Monkey, worth about $0.8 million in stock. First Eagle Investment Management also dropped its stock, about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Loews Corporation (NYSE:L). These stocks are Magna International Inc. (USA) (NYSE:MGA), United Continental Holdings Inc (NYSE:UAL), CA, Inc. (NASDAQ:CA), and Verisk Analytics, Inc. (NASDAQ:VRSK). This group of stocks’ market values are closest to Loews’ market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGA 27 435061 -2
UAL 63 3737163 6
CA 30 363061 -1
VRSK 23 592297 -2

As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.28 billion. That figure was $319 million in Lowe’s case. United Continental Holdings Inc (NYSE:UAL) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Loews Corporation (NYSE:L) is even less popular than VRSK.

Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None