The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Lawson Products, Inc. (NASDAQ:LAWS).
Hedge fund interest in Lawson Products, Inc. (NASDAQ:LAWS) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NexTier Oilfield Solutions Inc. (NYSE:NEX), GenMark Diagnostics, Inc (NASDAQ:GNMK), and Navigator Holdings Ltd (NYSE:NVGS) to gather more data points. Our calculations also showed that LAWS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now let’s take a glance at the recent hedge fund action regarding Lawson Products, Inc. (NASDAQ:LAWS).
What does smart money think about Lawson Products, Inc. (NASDAQ:LAWS)?
At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in LAWS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Lawson Products, Inc. (NASDAQ:LAWS) was held by Royce & Associates, which reported holding $5.8 million worth of stock at the end of September. It was followed by GAMCO Investors with a $5.1 million position. Other investors bullish on the company included Renaissance Technologies, Winton Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Lawson Products, Inc. (NASDAQ:LAWS), around 0.08% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to LAWS.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AQR Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let’s also examine hedge fund activity in other stocks similar to Lawson Products, Inc. (NASDAQ:LAWS). These stocks are NexTier Oilfield Solutions Inc. (NYSE:NEX), GenMark Diagnostics, Inc (NASDAQ:GNMK), Navigator Holdings Ltd (NYSE:NVGS), and Silver Spike Acquisition Corp. (NASDAQ:SSPKU). This group of stocks’ market values are closest to LAWS’s market value.
|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 15 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $15 million in LAWS’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand Silver Spike Acquisition Corp. (NASDAQ:SSPKU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Lawson Products, Inc. (NASDAQ:LAWS) is even less popular than SSPKU. Hedge funds clearly dropped the ball on LAWS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on LAWS as the stock returned 34% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.