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Lyft, Inc. (LYFT) Fell Out Of Favor With Hedge Funds

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Lyft, Inc. (NASDAQ:LYFT) and determine whether hedge funds skillfully traded this stock.

Lyft, Inc. (NASDAQ:LYFT) investors should be aware of a decrease in hedge fund interest recently. Lyft, Inc. (NASDAQ:LYFT) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 71. There were 31 hedge funds in our database with LYFT holdings at the end of March. Our calculations also showed that LYFT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are dozens of tools stock traders can use to assess publicly traded companies. Some of the most useful tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the S&P 500 by a healthy amount (see the details here).

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s go over the key hedge fund action encompassing Lyft, Inc. (NASDAQ:LYFT).

Hedge fund activity in Lyft, Inc. (NASDAQ:LYFT)

Heading into the third quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2020. By comparison, 37 hedge funds held shares or bullish call options in LYFT a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Lyft, Inc. (NASDAQ:LYFT), worth close to $133.8 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $49.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of D. E. Shaw’s D E Shaw, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Glade Brook Capital Partners allocated the biggest weight to Lyft, Inc. (NASDAQ:LYFT), around 4.54% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, designating 1.65 percent of its 13F equity portfolio to LYFT.

Due to the fact that Lyft, Inc. (NASDAQ:LYFT) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes in the second quarter. Intriguingly, Nancy Zevenbergen’s Zevenbergen Capital Investments said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $17.1 million in stock. Robert Pitts’s fund, Steadfast Capital Management, also sold off its stock, about $12.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lyft, Inc. (NASDAQ:LYFT) but similarly valued. We will take a look at Zendesk Inc (NYSE:ZEN), Bio-Techne Corporation (NASDAQ:TECH), United Airlines Holdings Inc (NASDAQ:UAL), Erie Indemnity Company (NASDAQ:ERIE), Medical Properties Trust, Inc. (NYSE:MPW), Advance Auto Parts, Inc. (NYSE:AAP), and NetApp Inc. (NASDAQ:NTAP). All of these stocks’ market caps are closest to LYFT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZEN 63 1579039 8
TECH 27 278924 1
UAL 38 917094 -3
ERIE 14 42805 -3
MPW 17 162185 1
AAP 47 1507053 9
NTAP 25 465896 -1
Average 33 707571 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $708 million. That figure was $324 million in LYFT’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 14 bullish hedge fund positions. Lyft, Inc. (NASDAQ:LYFT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LYFT is 33. 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 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 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately LYFT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LYFT investors were disappointed as the stock returned -3.2% since Q2 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 most of these stocks already outperformed the market in 2020.

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