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Lincoln Electric Holdings (LECO): Hedge Fund Sentiment Is Near All Time Low

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

Lincoln Electric Holdings, Inc. (NASDAQ:LECO) was in 16 hedge funds’ portfolios at the end of December. LECO has experienced a decrease in support from the world’s most elite money managers recently. There were 18 hedge funds in our database with LECO holdings at the end of the previous quarter. Our calculations also showed that LECO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To most shareholders, hedge funds are seen as worthless, old investment vehicles of the past. While there are greater than 8000 funds trading at present, Our experts hone in on the crème de la crème of this group, around 850 funds. It is estimated that this group of investors control most of the hedge fund industry’s total asset base, and by tailing their inimitable equity investments, Insider Monkey has spotted numerous investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Mario Gabelli of GAMCO Investors

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the fresh hedge fund action surrounding Lincoln Electric Holdings, Inc. (NASDAQ:LECO).

What does smart money think about Lincoln Electric Holdings, Inc. (NASDAQ:LECO)?

At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in LECO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Royce & Associates was the largest shareholder of Lincoln Electric Holdings, Inc. (NASDAQ:LECO), with a stake worth $94.5 million reported as of the end of September. Trailing Royce & Associates was Fisher Asset Management, which amassed a stake valued at $74.1 million. GLG Partners, AQR Capital Management, and GAMCO Investors 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 Royce & Associates allocated the biggest weight to Lincoln Electric Holdings, Inc. (NASDAQ:LECO), around 0.84% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to LECO.

Due to the fact that Lincoln Electric Holdings, Inc. (NASDAQ:LECO) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few funds that decided to sell off their full holdings in the third quarter. It’s worth mentioning that Gregg Moskowitz’s Interval Partners cut the largest stake of all the hedgies tracked by Insider Monkey, worth close to $5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Lincoln Electric Holdings, Inc. (NASDAQ:LECO). We will take a look at First Solar, Inc. (NASDAQ:FSLR), Gildan Activewear Inc (NYSE:GIL), Companhia Brasileira de Distribuicao (NYSE:CBD), and Globus Medical Inc (NYSE:GMED). This group of stocks’ market caps are closest to LECO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSLR 24 140318 -8
GIL 22 430332 2
CBD 9 45263 -2
GMED 29 256883 5
Average 21 218199 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $246 million in LECO’s case. Globus Medical Inc (NYSE:GMED) is the most popular stock in this table. On the other hand Companhia Brasileira de Distribuicao (NYSE:CBD) is the least popular one with only 9 bullish hedge fund positions. Lincoln Electric Holdings, Inc. (NASDAQ:LECO) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately LECO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LECO investors were disappointed as the stock returned -29.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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