At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Lowe’s Companies, Inc. (NYSE:LOW).
Is Lowe’s Companies, Inc. (NYSE:LOW) a good stock to buy now? Hedge funds were cutting their exposure. The number of bullish hedge fund positions shrunk by 6 recently. Lowe’s Companies, Inc. (NYSE:LOW) was in 83 hedge funds’ portfolios at the end of September. The all time high for this statistics is 89. Our calculations also showed that LOW 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 89 hedge funds in our database with LOW positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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 peek at the recent hedge fund action encompassing Lowe’s Companies, Inc. (NYSE:LOW).
What have hedge funds been doing with Lowe’s Companies, Inc. (NYSE:LOW)?
Heading into the fourth quarter of 2020, a total of 83 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. By comparison, 76 hedge funds held shares or bullish call options in LOW a year ago. 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, Pershing Square held the most valuable stake in Lowe’s Companies, Inc. (NYSE:LOW), which was worth $2058 million at the end of the third quarter. On the second spot was D E Shaw which amassed $1090.3 million worth of shares. Two Sigma Advisors, AQR Capital 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 Pershing Square allocated the biggest weight to Lowe’s Companies, Inc. (NYSE:LOW), around 23.33% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, setting aside 8.85 percent of its 13F equity portfolio to LOW.
Seeing as Lowe’s Companies, Inc. (NYSE:LOW) has witnessed a decline in interest from the smart money, logic holds that there was a specific group of funds that slashed their entire stakes heading into Q4. Intriguingly, Andreas Halvorsen’s Viking Global dropped the biggest position of all the hedgies tracked by Insider Monkey, worth close to $231.1 million in stock. Andrew Immerman and Jeremy Schiffman’s fund, Palestra Capital Management, also said goodbye to its stock, about $163.6 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Lowe’s Companies, Inc. (NYSE:LOW). These stocks are Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), Royal Dutch Shell plc (NYSE:RDS), Philip Morris International Inc. (NYSE:PM), Honeywell International Inc. (NYSE:HON), International Business Machines Corp. (NYSE:IBM), and BHP Group (NYSE:BBL). This group of stocks’ market caps are closest to LOW’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 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $2429 million. That figure was $6564 million in LOW’s case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Lowe’s Companies, Inc. (NYSE:LOW) is more popular among hedge funds. Our overall hedge fund sentiment score for LOW is 77. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Unfortunately LOW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LOW were disappointed as the stock returned -6.4% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.