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Is Luxfer Holdings PLC (LXFR) A Good Stock To Buy?

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 Luxfer Holdings PLC (NYSE:LXFR).

Is Luxfer Holdings PLC (NYSE:LXFR) a splendid investment today? Hedge funds are taking a bearish view. The number of long hedge fund positions went down by 1 recently. Our calculations also showed that LXFR isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Wil Harkey Nantahala Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the new hedge fund action encompassing Luxfer Holdings PLC (NYSE:LXFR).

What have hedge funds been doing with Luxfer Holdings PLC (NYSE:LXFR)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LXFR over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LXFR A Good Stock To Buy?

Among these funds, Paradice Investment Management held the most valuable stake in Luxfer Holdings PLC (NYSE:LXFR), which was worth $36.7 million at the end of the third quarter. On the second spot was Nantahala Capital Management which amassed $34.4 million worth of shares. Trigran Investments, Rutabaga Capital Management, and Royce & Associates 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 Paradice Investment Management allocated the biggest weight to Luxfer Holdings PLC (NYSE:LXFR), around 4.07% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, designating 3.24 percent of its 13F equity portfolio to LXFR.

Since Luxfer Holdings PLC (NYSE:LXFR) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that elected to cut their positions entirely in the first quarter. Interestingly, Frederick DiSanto’s Ancora Advisors dropped the largest investment of all the hedgies followed by Insider Monkey, comprising close to $1.7 million in stock. Minhua Zhang’s fund, Weld Capital Management, also cut its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Luxfer Holdings PLC (NYSE:LXFR) but similarly valued. We will take a look at Forterra, Inc. (NASDAQ:FRTA), SIGA Technologies Inc. (NASDAQ:SIGA), Antares Pharma Inc (NASDAQ:ATRS), and VirnetX Holding Corporation (NYSE:VHC). This group of stocks’ market values match LXFR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FRTA 14 38481 -1
SIGA 10 39676 -1
ATRS 20 23019 7
VHC 3 819 2
Average 11.75 25499 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $96 million in LXFR’s case. Antares Pharma Inc (NASDAQ:ATRS) is the most popular stock in this table. On the other hand VirnetX Holding Corporation (NYSE:VHC) is the least popular one with only 3 bullish hedge fund positions. Luxfer Holdings PLC (NYSE:LXFR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately LXFR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LXFR investors were disappointed as the stock returned -0.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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