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Should You Avoid Life Storage, Inc. (LSI)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Life Storage, Inc. (NYSE:LSI).

Life Storage, Inc. (NYSE:LSI) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. LSI was in 12 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with LSI positions at the end of the previous quarter. Our calculations also showed that lsi isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Ken Fisher FISHER ASSET MANAGEMENT

Let’s take a gander at the recent hedge fund action encompassing Life Storage, Inc. (NYSE:LSI).

Hedge fund activity in Life Storage, Inc. (NYSE:LSI)

Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LSI over the last 13 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with LSI Positions

Among these funds, Renaissance Technologies held the most valuable stake in Life Storage, Inc. (NYSE:LSI), which was worth $49.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $47.6 million worth of shares. Moreover, Citadel Investment Group, Arrowstreet Capital, and Waterfront Capital Partners were also bullish on Life Storage, Inc. (NYSE:LSI), allocating a large percentage of their portfolios to this stock.

Due to the fact that Life Storage, Inc. (NYSE:LSI) has experienced a decline in interest from the smart money, we can see that there exists a select few hedgies that decided to sell off their full holdings heading into Q3. Interestingly, Jonathan Litt’s Land & Buildings Investment Management dumped the biggest stake of the 700 funds followed by Insider Monkey, worth an estimated $37.8 million in call options, and Jeffrey Pierce’s Snow Park Capital Partners was right behind this move, as the fund dumped about $10.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Life Storage, Inc. (NYSE:LSI). We will take a look at Bemis Company, Inc. (NYSE:BMS), Ryman Hospitality Properties, Inc. (NYSE:RHP), Schneider National, Inc. (NYSE:SNDR), and Gramercy Property Trust Inc (NYSE:GPT). This group of stocks’ market values match LSI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMS 26 399893 7
RHP 24 605287 7
SNDR 19 104735 2
GPT 21 875563 2
Average 22.5 496370 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $496 million. That figure was $127 million in LSI’s case. Bemis Company, Inc. (NYSE:BMS) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Life Storage, Inc. (NYSE:LSI) is even less popular than SNDR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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