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Were Hedge Funds Right About Lam Research Corporation (NASDAQ:LRCX)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Lam Research Corporation (NASDAQ:LRCX).

Is Lam Research Corporation (NASDAQ:LRCX) a great investment now? The best stock pickers are getting more optimistic. The number of bullish hedge fund bets inched up by 2 in recent months. Our calculations also showed that LRCX isn’t among the 30 most popular stocks among hedge funds.

According to most traders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the elite of this club, about 750 funds. These investment experts manage bulk of all hedge funds’ total asset base, and by following their finest investments, Insider Monkey has come up with many investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Lee Ainslie MAVERICK CAPITAL

We’re going to take a look at the key hedge fund action regarding Lam Research Corporation (NASDAQ:LRCX).

What have hedge funds been doing with Lam Research Corporation (NASDAQ:LRCX)?

Heading into the first quarter of 2019, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LRCX over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

LRCX_mar2019

Among these funds, AQR Capital Management held the most valuable stake in Lam Research Corporation (NASDAQ:LRCX), which was worth $164.9 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $106.9 million worth of shares. Moreover, Renaissance Technologies, Adage Capital Management, and Citadel Investment Group were also bullish on Lam Research Corporation (NASDAQ:LRCX), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. D1 Capital Partners, managed by Daniel Sundheim, established the most valuable position in Lam Research Corporation (NASDAQ:LRCX). D1 Capital Partners had $32 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $13 million investment in the stock during the quarter. The other funds with brand new LRCX positions are Sander Gerber’s Hudson Bay Capital Management, Wayne Cooperman’s Cobalt Capital Management, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lam Research Corporation (NASDAQ:LRCX) but similarly valued. We will take a look at AutoZone, Inc. (NYSE:AZO), ArcelorMittal (NYSE:MT), Ventas, Inc. (NYSE:VTR), and Rogers Communications Inc. (NYSE:RCI). This group of stocks’ market valuations match LRCX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZO 40 1625815 10
MT 13 209696 -1
VTR 14 284947 -1
RCI 13 518999 -2
Average 20 659864 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $660 million. That figure was $863 million in LRCX’s case. AutoZone, Inc. (NYSE:AZO) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 13 bullish hedge fund positions. Lam Research Corporation (NASDAQ:LRCX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on LRCX as the stock returned 33.9% and outperformed the market by a very large margin as well.

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

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