Is LPI A Good Stock To Buy Now?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Laredo Petroleum Inc (NYSE:LPI).

Is LPI a good stock to buy now? Laredo Petroleum Inc (NYSE:LPI) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 24. LPI shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. There were 11 hedge funds in our database with LPI holdings at the end of June. Our calculations also showed that LPI 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.

In the eyes of most market participants, hedge funds are assumed to be unimportant, old investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts choose to focus on the moguls of this group, about 850 funds. It is estimated that this group of investors manage most of the smart money’s total asset base, and by shadowing their finest stock picks, Insider Monkey has spotted numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium 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. Keeping this in mind let’s view the fresh hedge fund action regarding Laredo Petroleum Inc (NYSE:LPI).

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

Heading into the fourth quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LPI over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Laredo Petroleum Inc (NYSE:LPI) was held by Arrowstreet Capital, which reported holding $2.6 million worth of stock at the end of September. It was followed by D E Shaw with a $1.5 million position. Other investors bullish on the company included Millennium Management, Water Street Capital, and PDT Partners. In terms of the portfolio weights assigned to each position Water Street Capital allocated the biggest weight to Laredo Petroleum Inc (NYSE:LPI), around 0.09% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to LPI.

Seeing as Laredo Petroleum Inc (NYSE:LPI) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of hedge funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that Vince Maddi and Shawn Brennan’s SIR Capital Management dumped the biggest stake of the 750 funds followed by Insider Monkey, worth close to $2.5 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Laredo Petroleum Inc (NYSE:LPI). We will take a look at Genocea Biosciences Inc (NASDAQ:GNCA), Kopin Corporation (NASDAQ:KOPN), Harvard Bioscience, Inc. (NASDAQ:HBIO), MDC Partners Inc. (NASDAQ:MDCA), Lantern Pharma Inc. (NASDAQ:LTRN), Bank of Commerce Holdings (NASDAQ:BOCH), and Kirkland’s, Inc. (NASDAQ:KIRK). This group of stocks’ market caps match LPI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNCA 10 28497 0
KOPN 2 2588 -1
HBIO 12 18011 0
MDCA 11 28165 -2
LTRN 1 661 1
BOCH 5 6817 -1
KIRK 11 29293 4
Average 7.4 16290 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $9 million in LPI’s case. Harvard Bioscience, Inc. (NASDAQ:HBIO) is the most popular stock in this table. On the other hand Lantern Pharma Inc. (NASDAQ:LTRN) is the least popular one with only 1 bullish hedge fund positions. Laredo Petroleum Inc (NYSE:LPI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LPI is 57.4. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on LPI as the stock returned 83.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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