While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers 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 Lowe's Companies, Inc. (NYSE:LOW).
Is Lowe's Companies, Inc. (NYSE:LOW) a sound investment today? The smart money was taking an optimistic view. The number of long hedge fund positions inched up by 2 recently. Lowe's Companies, Inc. (NYSE:LOW) was in 63 hedge funds' portfolios at the end of June. The all time high for this statistic is 89. Our calculations also showed that LOW isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 61 hedge funds in our database with LOW positions at the end of the first quarter.
According to most investors, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are more than 8000 funds in operation today, Our experts choose to focus on the top tier of this group, around 850 funds. These investment experts have their hands on most of the hedge fund industry's total asset base, and by shadowing their finest equity investments, Insider Monkey has discovered several investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Michael Gelband of ExodusPoint Capital
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Do Hedge Funds Think LOW Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. By comparison, 89 hedge funds held shares or bullish call options in LOW a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lowe's Companies, Inc. (NYSE:LOW) was held by Pershing Square, which reported holding $1967 million worth of stock at the end of June. It was followed by Soroban Capital Partners with a $826.9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Lowe's Companies, Inc. (NYSE:LOW), around 18.37% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, setting aside 9.56 percent of its 13F equity portfolio to LOW.
As industrywide interest jumped, some big names have been driving this bullishness. Paloma Partners, managed by Donald Sussman, initiated the largest call position in Lowe's Companies, Inc. (NYSE:LOW). Paloma Partners had $28.3 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also made a $15.8 million investment in the stock during the quarter. The other funds with brand new LOW positions are Michael Gelband's ExodusPoint Capital, Benjamin A. Smith's Laurion Capital Management, and Robert Pohly's Samlyn Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Lowe's Companies, Inc. (NYSE:LOW) but similarly valued. These stocks are Rio Tinto Group (NYSE:RIO), HDFC Bank Limited (NYSE:HDB), Intuit Inc. (NASDAQ:INTU), BlackRock, Inc. (NYSE:BLK), American Express Company (NYSE:AXP), Starbucks Corporation (NASDAQ:SBUX), and Sanofi (NYSE:SNY). This group of stocks' market caps are closest to LOW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RIO,21,1420451,-4 HDB,39,1731917,12 INTU,66,5382791,-2 BLK,47,1282801,5 AXP,52,28660485,-1 SBUX,63,4757968,2 SNY,16,1261299,1 Average,43.4,6356816,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $6357 million. That figure was $4968 million in LOW's case. Intuit Inc. (NASDAQ:INTU) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 16 bullish hedge fund positions. Lowe's Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LOW is 75.2. 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 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on LOW as the stock returned 21.5% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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