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Were Hedge Funds Right About Flocking Into LyondellBasell Industries NV (LYB)?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding LyondellBasell Industries NV (NYSE:LYB).

LyondellBasell Industries NV (NYSE:LYB) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Our calculations also showed that LYB isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers look at the leaders of this club, around 750 funds. These money managers handle most of the smart money’s total asset base, and by tailing their matchless equity investments, Insider Monkey has unsheathed a few investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

GLENVIEW CAPITAL

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the key hedge fund action regarding LyondellBasell Industries NV (NYSE:LYB).

How have hedgies been trading LyondellBasell Industries NV (NYSE:LYB)?

Heading into the third quarter of 2019, a total of 45 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 LYB over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

LYB_oct2019

More specifically, Millennium Management was the largest shareholder of LyondellBasell Industries NV (NYSE:LYB), with a stake worth $500.8 million reported as of the end of March. Trailing Millennium Management was Glenview Capital, which amassed a stake valued at $355.9 million. AQR Capital Management, Aristeia Capital, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key hedge funds were breaking ground themselves. Aristeia Capital, managed by Robert Henry Lynch, assembled the most valuable position in LyondellBasell Industries NV (NYSE:LYB). Aristeia Capital had $226.3 million invested in the company at the end of the quarter. Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners also made a $129.2 million investment in the stock during the quarter. The other funds with brand new LYB positions are Steve Cohen’s Point72 Asset Management, Benjamin A. Smith’s Laurion Capital Management, and Shane Finemore’s Manikay Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LyondellBasell Industries NV (NYSE:LYB) but similarly valued. We will take a look at Atlassian Corporation Plc (NASDAQ:TEAM), General Mills, Inc. (NYSE:GIS), IQVIA Holdings, Inc. (NYSE:IQV), and HP Inc. (NYSE:HPQ). This group of stocks’ market values are closest to LYB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TEAM 36 1996530 0
GIS 39 1025933 7
IQV 67 5892581 3
HPQ 32 870489 -3
Average 43.5 2446383 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.5 hedge funds with bullish positions and the average amount invested in these stocks was $2446 million. That figure was $2066 million in LYB’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand HP Inc. (NYSE:HPQ) is the least popular one with only 32 bullish hedge fund positions. LyondellBasell Industries NV (NYSE:LYB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LYB, though not to the same extent, as the stock returned 5.3% during the third quarter and outperformed the market as well.

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

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