Lear Corporation (LEA) Fell Out Of Favor With Hedge Funds

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 have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Lear Corporation (NYSE:LEA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Lear Corporation (NYSE:LEA) a superb investment now? Prominent investors were taking a pessimistic view. The number of bullish hedge fund positions decreased by 13 recently. Lear Corporation (NYSE:LEA) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that LEA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 36 hedge funds in our database with LEA positions at the end of the fourth quarter.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Alexander Roepers of Atlantic Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Lear Corporation (NYSE:LEA).

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

At the end of March, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LEA over the last 23 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Lear Corporation (NYSE:LEA), which was worth $842.8 million at the end of the fourth quarter. On the second spot was Paradice Investment Management which amassed $104.4 million worth of shares. Greenhaven Associates, Balyasny Asset Management, and Atlantic Investment Management 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 Atlantic Investment Management allocated the biggest weight to Lear Corporation (NYSE:LEA), around 10.22% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, dishing out 5.01 percent of its 13F equity portfolio to LEA.

Since Lear Corporation (NYSE:LEA) has experienced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of money managers that decided to sell off their full holdings heading into Q2. Interestingly, Jack Woodruff’s Candlestick Capital Management said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $26.2 million in stock, and Ben Jacobs’s Anomaly Capital Management was right behind this move, as the fund said goodbye to about $12.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 13 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to Lear Corporation (NYSE:LEA). We will take a look at Credicorp Ltd. (NYSE:BAP), AGCO Corporation (NYSE:AGCO), Ozon Holdings PLC (NASDAQ:OZON), Steel Dynamics, Inc. (NASDAQ:STLD), Five Below Inc (NASDAQ:FIVE), Iron Mountain Incorporated (NYSE:IRM), and Repligen Corporation (NASDAQ:RGEN). All of these stocks’ market caps match LEA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BAP 22 236121 7
AGCO 36 552596 -4
OZON 17 136135 -4
STLD 26 570961 -1
FIVE 43 1010018 1
IRM 16 56371 -2
RGEN 38 1039405 1
Average 28.3 514515 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $515 million. That figure was $1218 million in LEA’s case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 16 bullish hedge fund positions. Lear Corporation (NYSE:LEA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LEA is 20.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately LEA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LEA investors were disappointed as the stock returned -9.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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