LSB Industries, Inc. (LXU): Are Hedge Funds Right About This Stock?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of LSB Industries, Inc. (NYSE:LXU) based on that data.

LSB Industries, Inc. (NYSE:LXU) was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. LXU investors should be aware of an increase in hedge fund interest lately. There were 4 hedge funds in our database with LXU positions at the end of the previous quarter. Our calculations also showed that LXU 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.

In today’s marketplace there are many gauges market participants use to value their holdings. Two of the most under-the-radar gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the broader indices by a healthy margin (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

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. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing LSB Industries, Inc. (NYSE:LXU).

How have hedgies been trading LSB Industries, Inc. (NYSE:LXU)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in LXU over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Maple Rock Capital, managed by Len Kipp and Xavier Majic, holds the most valuable position in LSB Industries, Inc. (NYSE:LXU). Maple Rock Capital has a $2 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Tontine Asset Management, managed by Jeffrey Gendell, which holds a $1.6 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism comprise Renaissance Technologies, Chuck Royce’s Royce & Associates and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to LSB Industries, Inc. (NYSE:LXU), around 0.51% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, dishing out 0.51 percent of its 13F equity portfolio to LXU.

As aggregate interest increased, specific money managers have been driving this bullishness. Maple Rock Capital, managed by Len Kipp and Xavier Majic, assembled the largest position in LSB Industries, Inc. (NYSE:LXU). Maple Rock Capital had $2 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LSB Industries, Inc. (NYSE:LXU) but similarly valued. These stocks are Whiting Petroleum Corporation (NYSE:WLL), IEC Electronics Corp. (NASDAQ:IEC), Aware, Inc. (NASDAQ:AWRE), and Milestone Scientific, Inc. (NYSE:MLSS). All of these stocks’ market caps match LXU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WLL 12 2838 -3
IEC 2 5924 0
AWRE 2 7625 0
MLSS 2 302 1
Average 4.5 4172 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in LXU’s case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand IEC Electronics Corp. (NASDAQ:IEC) is the least popular one with only 2 bullish hedge fund positions. LSB Industries, Inc. (NYSE:LXU) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately LXU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LXU were disappointed as the stock returned -48.6% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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