Luminex Corporation (LMNX): Hedge Funds Cashing Out

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Luminex Corporation (NASDAQ:LMNX).

Is Luminex Corporation (NASDAQ:LMNX) worth your attention right now? The smart money is in a pessimistic mood. The number of bullish hedge fund bets went down by 2 in recent months. Our calculations also showed that LMNX 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.

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. 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the new hedge fund action surrounding Luminex Corporation (NASDAQ:LMNX).

What does smart money think about Luminex Corporation (NASDAQ:LMNX)?

Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LMNX over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LMNX A Good Stock To Buy?

Among these funds, RGM Capital held the most valuable stake in Luminex Corporation (NASDAQ:LMNX), which was worth $92.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $63.7 million worth of shares. Select Equity Group, D E Shaw, and DAFNA Capital 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 RGM Capital allocated the biggest weight to Luminex Corporation (NASDAQ:LMNX), around 7.3% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, earmarking 2.34 percent of its 13F equity portfolio to LMNX.

Since Luminex Corporation (NASDAQ:LMNX) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who were dropping their full holdings in the first quarter. Interestingly, Kevin Kotler’s Broadfin Capital cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $4.8 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $0.3 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Luminex Corporation (NASDAQ:LMNX). These stocks are Wolverine World Wide, Inc. (NYSE:WWW), MakeMyTrip Limited (NASDAQ:MMYT), Renasant Corporation (NASDAQ:RNST), and LTC Properties Inc (NYSE:LTC). All of these stocks’ market caps are similar to LMNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WWW 22 84713 -1
MMYT 9 32911 -5
RNST 12 18604 0
LTC 11 25083 1
Average 13.5 40328 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $233 million in LMNX’s case. Wolverine World Wide, Inc. (NYSE:WWW) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 9 bullish hedge fund positions. Luminex Corporation (NASDAQ:LMNX) 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately LMNX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LMNX were disappointed as the stock returned 12% 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.