Is Levi Strauss & Co. (LEVI) A Good Stock To Buy According To Hedge Funds?

Reymerlyn Martin

Sat, Jun 22, 2019, 7:58 PM

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 Levi Strauss & Co. (NYSE:LEVI)? The smart money sentiment can provide an answer to this question.

Is Levi Strauss & Co. (NYSE:LEVI) a healthy stock for your portfolio? The best stock pickers are turning bullish. The number of long hedge fund positions rose by 25 lately. Our calculations also showed that LEVI isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

We're going to view the recent hedge fund action encompassing Levi Strauss & Co. (NYSE:LEVI).

How have hedgies been trading Levi Strauss & Co. (NYSE:LEVI)?

At Q1's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LEVI over the last 15 quarters. 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, Alyeska Investment Group was the largest shareholder of Levi Strauss & Co. (NYSE:LEVI), with a stake worth $25.9 million reported as of the end of March. Trailing Alyeska Investment Group was Millennium Management, which amassed a stake valued at $23.6 million. Element Capital Management, Citadel Investment Group, and OZ Management were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, initiated the most valuable position in Levi Strauss & Co. (NYSE:LEVI). Alyeska Investment Group had $25.9 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $23.6 million position during the quarter. The other funds with brand new LEVI positions are Jeffrey Talpins's Element Capital Management, Ken Griffin's Citadel Investment Group, and Daniel S. Och's OZ Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Levi Strauss & Co. (NYSE:LEVI) but similarly valued. These stocks are Torchmark Corporation (NYSE:TMK), DaVita Inc (NYSE:DVA), ASE Technology Holding Co., Ltd. (NYSE:ASX), and United Rentals, Inc. (NYSE:URI). All of these stocks' market caps are closest to LEVI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMK,21,723812,2 DVA,36,3100211,-3 ASX,9,182312,2 URI,45,819606,-3 Average,27.75,1206485,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1206 million. That figure was $152 million in LEVI's case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Advanced Semiconductor Engineering (NYSE:ASX) is the least popular one with only 9 bullish hedge fund positions. Levi Strauss & Co. (NYSE:LEVI) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately LEVI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LEVI investors were disappointed as the stock returned -5.3% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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