In this article we will take a look at whether hedge funds think Lifeway Foods, Inc. (NASDAQ:LWAY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Lifeway Foods, Inc. (NASDAQ:LWAY) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of March. Our calculations also showed that LWAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Merrimack Pharmaceuticals Inc (NASDAQ:MACK), Universe Pharmaceuticals INC (NASDAQ:UPC), and Urban One, Inc. (NASDAQ:UONEK) to gather more data points.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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 analyze the key hedge fund action regarding Lifeway Foods, Inc. (NASDAQ:LWAY).
Do Hedge Funds Think LWAY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LWAY over the last 23 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Lifeway Foods, Inc. (NASDAQ:LWAY), worth close to $2.8 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, managed by Mario Gabelli, which holds a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions consist of Ken Griffin’s Citadel Investment Group, Kahn Brothers and . In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Lifeway Foods, Inc. (NASDAQ:LWAY), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0034 percent of its 13F equity portfolio to LWAY.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium 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 Citadel Investment Group).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lifeway Foods, Inc. (NASDAQ:LWAY) but similarly valued. These stocks are Merrimack Pharmaceuticals Inc (NASDAQ:MACK), Universe Pharmaceuticals INC (NASDAQ:UPC), Urban One, Inc. (NASDAQ:UONEK), Dolphin Entertainment, Inc. (NASDAQ:DLPN), Beasley Broadcast Group Inc (NASDAQ:BBGI), Streamline Health Solutions Inc. (NASDAQ:STRM), and Issuer Direct Corporation (NYSE:ISDR). This group of stocks’ market valuations are similar to LWAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MACK | 7 | 19361 | 0 |
| UPC | 1 | 128 | 1 |
| UONEK | 4 | 1893 | 1 |
| DLPN | 1 | 150 | 0 |
| BBGI | 2 | 3398 | -1 |
| STRM | 5 | 23686 | -2 |
| ISDR | 2 | 1646 | 0 |
| Average | 3.1 | 7180 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $3 million in LWAY’s case. Merrimack Pharmaceuticals Inc (NASDAQ:MACK) is the most popular stock in this table. On the other hand Universe Pharmaceuticals INC (NASDAQ:UPC) is the least popular one with only 1 bullish hedge fund positions. Lifeway Foods, Inc. (NASDAQ:LWAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LWAY is 54. 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 positive signal but 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately LWAY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LWAY were disappointed as the stock returned 0% since the end of March (through 6/11) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
