Was The Smart Money Right About Lyft, Inc. (LYFT)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Lyft, Inc. (NASDAQ:LYFT).

Lyft, Inc. (NASDAQ:LYFT) has experienced an increase in activity from the world’s largest hedge funds recently. Lyft, Inc. (NASDAQ:LYFT) was in 52 hedge funds’ portfolios at the end of December. The all time high for this statistic is 71. Our calculations also showed that LYFT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 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.

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the new hedge fund action regarding Lyft, Inc. (NASDAQ:LYFT).

Do Hedge Funds Think LYFT Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 63% from one quarter earlier. By comparison, 45 hedge funds held shares or bullish call options in LYFT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Lyft, Inc. (NASDAQ:LYFT) was held by Citadel Investment Group, which reported holding $204.6 million worth of stock at the end of December. It was followed by Glenview Capital with a $101.4 million position. Other investors bullish on the company included Millennium Management, Engle Capital, and Cavalry Asset Management. In terms of the portfolio weights assigned to each position Engle Capital allocated the biggest weight to Lyft, Inc. (NASDAQ:LYFT), around 9.89% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, designating 4.97 percent of its 13F equity portfolio to LYFT.

As one would reasonably expect, specific money managers have been driving this bullishness. Engle Capital, managed by Jeffrey Hoffner, established the largest position in Lyft, Inc. (NASDAQ:LYFT). Engle Capital had $68.8 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $52.1 million position during the quarter. The following funds were also among the new LYFT investors: Philippe Laffont’s Coatue Management, David Cohen and Harold Levy’s Iridian Asset Management, and Bruce Emery’s Greenvale Capital.

Let’s go over hedge fund activity in other stocks similar to Lyft, Inc. (NASDAQ:LYFT). These stocks are MGM Resorts International (NYSE:MGM), Darden Restaurants, Inc. (NYSE:DRI), Regions Financial Corporation (NYSE:RF), Essex Property Trust Inc (NYSE:ESS), Caesars Entertainment Inc. (NASDAQ:CZR), CarMax Inc (NYSE:KMX), and Shinhan Financial Group Co., Ltd. (NYSE:SHG). This group of stocks’ market values match LYFT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGM 44 2171039 3
DRI 42 1410846 1
RF 26 203027 3
ESS 25 309571 -3
CZR 71 1438605 -3
KMX 46 1485714 -8
SHG 7 27734 3
Average 37.3 1006648 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $1007 million. That figure was $1167 million in LYFT’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. Lyft, Inc. (NASDAQ:LYFT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LYFT is 67.1. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on LYFT, though not to the same extent, as the stock returned 13.3% since Q4 (through April 30th) and outperformed the market as well.

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