Where Do Hedge Funds Stand On Leslie’s, Inc. (LESL)?

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 Leslie’s, Inc. (NASDAQ:LESL)? The smart money sentiment can provide an answer to this question.

Is Leslie’s, Inc. (NASDAQ:LESL) a superb investment now? The smart money was becoming more confident. The number of long hedge fund bets rose by 5 in recent months. Leslie’s, Inc. (NASDAQ:LESL) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LESL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 22 hedge funds in our database with LESL holdings at the end of December.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Third Point

Dan Loeb of Third Point

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. With all of this in mind we’re going to take a gander at the new hedge fund action encompassing Leslie’s, Inc. (NASDAQ:LESL).

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

At the end of March, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LESL over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Third Point, managed by Dan Loeb, holds the number one position in Leslie’s, Inc. (NASDAQ:LESL). Third Point has a $150.6 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Woodson Capital Management, led by James Woodson Davis, holding a $30.6 million position; 2.3% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism consist of Jack Woodruff’s Candlestick Capital Management, Joe Milano’s Greenhouse Funds and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Leslie’s, Inc. (NASDAQ:LESL), around 2.29% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, designating 1.28 percent of its 13F equity portfolio to LESL.

As aggregate interest increased, some big names were breaking ground themselves. Intrinsic Edge Capital, managed by Mark Coe, initiated the biggest position in Leslie’s, Inc. (NASDAQ:LESL). Intrinsic Edge Capital had $7.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $6.1 million investment in the stock during the quarter. The following funds were also among the new LESL investors: Chuck Royce’s Royce & Associates, Brandon Haley’s Holocene Advisors, and Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Leslie’s, Inc. (NASDAQ:LESL) but similarly valued. These stocks are Kornit Digital Ltd. (NASDAQ:KRNT), National Beverage Corp. (NASDAQ:FIZZ), Blackstone Mortgage Trust Inc (NYSE:BXMT), National Fuel Gas Company (NYSE:NFG), Asana Inc. (NYSE:ASAN), ShockWave Medical, Inc. (NASDAQ:SWAV), and Allison Transmission Holdings Inc (NYSE:ALSN). All of these stocks’ market caps resemble LESL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KRNT 24 153853 9
FIZZ 15 258478 -6
BXMT 16 209515 -1
NFG 16 92712 3
ASAN 22 374549 4
SWAV 17 219798 -5
ALSN 30 498494 5
Average 20 258200 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $286 million in LESL’s case. Allison Transmission Holdings Inc (NYSE:ALSN) is the most popular stock in this table. On the other hand National Beverage Corp. (NASDAQ:FIZZ) is the least popular one with only 15 bullish hedge fund positions. Leslie’s, Inc. (NASDAQ:LESL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LESL is 80. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately LESL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LESL were disappointed as the stock returned 9.8% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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