In this article we will take a look at whether hedge funds think Lifevantage Corporation (NASDAQ:LFVN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Lifevantage Corporation (NASDAQ:LFVN) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Trecora Resources (NYSE:TREC), G. Willi-Food International Limited (NASDAQ:WILC), and Kaleyra, Inc. (NASDAQ:KLR) to gather more data points. Our calculations also showed that LFVN 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 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 S&P 500 ETFs by 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 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Keeping this in mind let’s analyze the recent hedge fund action encompassing Lifevantage Corporation (NASDAQ:LFVN).
What have hedge funds been doing with Lifevantage Corporation (NASDAQ:LFVN)?
At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LFVN 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.
More specifically, Renaissance Technologies was the largest shareholder of Lifevantage Corporation (NASDAQ:LFVN), with a stake worth $11.9 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.6 million. Citadel Investment Group, AQR Capital Management, and Winton 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 Renaissance Technologies allocated the biggest weight to Lifevantage Corporation (NASDAQ:LFVN), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to LFVN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lifevantage Corporation (NASDAQ:LFVN) but similarly valued. We will take a look at Trecora Resources (NYSE:TREC), G. Willi-Food International Limited (NASDAQ:WILC), Kaleyra, Inc. (NASDAQ:KLR), and WhiteHorse Finance, Inc. (NASDAQ:WHF). This group of stocks’ market values are similar to LFVN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $15 million in LFVN’s case. Trecora Resources (NYSE:TREC) is the most popular stock in this table. On the other hand G. Willi-Food International Limited (NASDAQ:WILC) is the least popular one with only 2 bullish hedge fund positions. Lifevantage Corporation (NASDAQ:LFVN) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on LFVN as the stock returned 37.1% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.