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Did Hedge Funds Drop The Ball On LINE Corporation (LN) ?
Reymerlyn Martin
With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was LINE Corporation (NYSE:LN).
LINE Corporation (NYSE:LN) investors should be aware of a decrease in hedge fund sentiment in recent months. Our calculations also showed that LN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 market participants, hedge funds are perceived as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, We choose to focus on the top tier of this club, about 750 funds. Most estimates calculate that this group of people direct bulk of the smart money's total capital, and by keeping an eye on their finest equity investments, Insider Monkey has come up with various investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a peek at the latest hedge fund action regarding LINE Corporation (NYSE:LN).
How are hedge funds trading LINE Corporation (NYSE:LN)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the second quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in LN a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Tremblant Capital was the largest shareholder of LINE Corporation (NYSE:LN), with a stake worth $52.2 million reported as of the end of September. Trailing Tremblant Capital was Hillhouse Capital Management, which amassed a stake valued at $43.4 million. Renaissance Technologies, CSat Investment Advisory, and Millennium 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 Tremblant Capital allocated the biggest weight to LINE Corporation (NYSE:LN), around 3% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to LN.
Seeing as LINE Corporation (NYSE:LN) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who sold off their positions entirely by the end of the third quarter. Intriguingly, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners said goodbye to the biggest investment of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $1.1 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund sold off about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to LINE Corporation (NYSE:LN). These stocks are Store Capital Corporation (NYSE:STOR), Snap-on Incorporated (NYSE:SNA), Guidewire Software Inc (NYSE:GWRE), and Cypress Semiconductor Corporation (NASDAQ:CY). This group of stocks' market values are closest to LN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STOR,18,979106,-4 SNA,24,487528,-1 GWRE,22,836569,0 CY,34,1456562,-2 Average,24.5,939941,-1.75 [/table]
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $940 million. That figure was $106 million in LN's case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Store Capital Corporation (NYSE:STOR) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks LINE Corporation (NYSE:LN) is even less popular than STOR. Hedge funds clearly dropped the ball on LN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on LN as the stock returned 30.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
