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Should You Avoid Louisiana-Pacific Corporation (LPX)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Louisiana-Pacific Corporation (NYSE:LPX)? The smart money sentiment can provide an answer to this question.

Is Louisiana-Pacific Corporation (NYSE:LPX) a bargain? Money managers are becoming less hopeful. The number of bullish hedge fund positions decreased by 2 recently. Our calculations also showed that LPX isn’t among the 30 most popular stocks among hedge funds.

In the 21st century investor’s toolkit there are dozens of tools market participants put to use to grade their holdings. Some of the most underrated tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a very impressive amount (see the details here).

RENAISSANCE TECHNOLOGIES

Let’s take a peek at the recent hedge fund action encompassing Louisiana-Pacific Corporation (NYSE:LPX).

Hedge fund activity in Louisiana-Pacific Corporation (NYSE:LPX)

At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in LPX at the beginning of this year. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

LPX_dec2018

Among these funds, GLG Partners held the most valuable stake in Louisiana-Pacific Corporation (NYSE:LPX), which was worth $65.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $63.8 million worth of shares. Moreover, Millennium Management, AQR Capital Management, and Adage Capital Management were also bullish on Louisiana-Pacific Corporation (NYSE:LPX), allocating a large percentage of their portfolios to this stock.

Because Louisiana-Pacific Corporation (NYSE:LPX) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest position of the 700 funds monitored by Insider Monkey, worth an estimated $6.2 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its stock, about $3.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Louisiana-Pacific Corporation (NYSE:LPX). These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), Churchill Downs Incorporated (NASDAQ:CHDN), Cleveland-Cliffs Inc (NYSE:CLF), and Endo International plc (NASDAQ:ENDP). This group of stocks’ market valuations are similar to LPX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTEK 17 69201 6
CHDN 26 550485 4
CLF 25 446298 2
ENDP 22 774550 0
Average 22.5 460134 3

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 $460 million. That figure was $361 million in LPX’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Tetra Tech, Inc. (NASDAQ:TTEK) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Louisiana-Pacific Corporation (NYSE:LPX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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