We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Lakeland Financial Corporation (NASDAQ:LKFN)?
Lakeland Financial Corporation (NASDAQ:LKFN) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that LKFN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 S&P 500 ETFs by more than 41 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action surrounding Lakeland Financial Corporation (NASDAQ:LKFN).
Hedge fund activity in Lakeland Financial Corporation (NASDAQ:LKFN)
At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LKFN over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in Lakeland Financial Corporation (NASDAQ:LKFN), worth close to $13.5 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $1.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish include Ken Griffin’s Citadel Investment Group, Peter Muller’s PDT Partners and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to Lakeland Financial Corporation (NASDAQ:LKFN), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to LKFN.
Since Lakeland Financial Corporation (NASDAQ:LKFN) has experienced falling interest from the smart money, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $2.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lakeland Financial Corporation (NASDAQ:LKFN) but similarly valued. We will take a look at TriCo Bancshares (NASDAQ:TCBK), Patrick Industries, Inc. (NASDAQ:PATK), Silk Road Medical, Inc. (NASDAQ:SILK), and So-Young International Inc. (NASDAQ:SY). This group of stocks’ market values resemble LKFN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCBK | 11 | 44295 | 1 |
| PATK | 18 | 124804 | 1 |
| SILK | 12 | 88513 | 4 |
| SY | 7 | 61965 | 5 |
| Average | 12 | 79894 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $19 million in LKFN’s case. Patrick Industries, Inc. (NASDAQ:PATK) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 7 bullish hedge fund positions. Lakeland Financial Corporation (NASDAQ:LKFN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately LKFN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LKFN investors were disappointed as the stock returned -16.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
