In this article we will take a look at whether hedge funds think Lamb Weston Holdings, Inc. (NYSE:LW) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is LW a good stock to buy? Lamb Weston Holdings, Inc. (NYSE:LW) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Lamb Weston Holdings, Inc. (NYSE:LW) was in 36 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 42. Our calculations also showed that LW isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
David Harding of Winton Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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 go over the key hedge fund action surrounding Lamb Weston Holdings, Inc. (NYSE:LW).
Do Hedge Funds Think LW Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the first quarter of 2020. On the other hand, there were a total of 25 hedge funds with a bullish position in LW a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Lamb Weston Holdings, Inc. (NYSE:LW), with a stake worth $134.9 million reported as of the end of June. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $129.1 million. Candlestick Capital Management, Scopus Asset Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position BlueDrive Global Investors allocated the biggest weight to Lamb Weston Holdings, Inc. (NYSE:LW), around 8.04% of its 13F portfolio. Candlestick Capital Management is also relatively very bullish on the stock, dishing out 2.3 percent of its 13F equity portfolio to LW.
Since Lamb Weston Holdings, Inc. (NYSE:LW) has faced bearish sentiment from the smart money, it’s easy to see that there exists a select few fund managers who were dropping their full holdings last quarter. It’s worth mentioning that Peter Avellone’s Cartenna Capital dumped the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $8.5 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dropped about $3.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Lamb Weston Holdings, Inc. (NYSE:LW). These stocks are Chegg Inc (NYSE:CHGG), Trex Company, Inc. (NYSE:TREX), Grifols SA (NASDAQ:GRFS), The Toro Company (NYSE:TTC), Newell Brands Inc. (NYSE:NWL), Molson Coors Beverage Company (NYSE:TAP), and BorgWarner Inc. (NYSE:BWA). This group of stocks’ market valuations match LW’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHGG,38,667256,5 TREX,25,206431,2 GRFS,14,283634,2 TTC,32,976252,0 NWL,25,2028252,1 TAP,39,519321,5 BWA,27,567604,0 Average,28.6,749821,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $750 million. That figure was $693 million in LW’s case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 14 bullish hedge fund positions. Lamb Weston Holdings, Inc. (NYSE:LW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LW is 72.7. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately LW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LW were disappointed as the stock returned -31.3% since the end of June (through 10/11) 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.