The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Luby's, Inc. (NYSE:LUB) based on those filings.
Luby's, Inc. (NYSE:LUB) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of March. At the end of this article we will also compare LUB to other stocks including Wireless Telecom Group, Inc. (NYSE:WTT), Kewaunee Scientific Corporation (NASDAQ:KEQU), and Innodata Inc (NASDAQ:INOD) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's check out the fresh hedge fund action surrounding Luby's, Inc. (NYSE:LUB).
How have hedgies been trading Luby's, Inc. (NYSE:LUB)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in LUB a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bandera Partners, managed by Gregory Bylinsky and Jefferson Gramm, holds the number one position in Luby's, Inc. (NYSE:LUB). Bandera Partners has a $1.9 million position in the stock, comprising 1.6% of its 13F portfolio. Coming in second is Fondren Management, led by Bradley Louis Radoff, holding a $0.2 million position; 0.6% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Luby's, Inc. (NYSE:LUB), around 1.61% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to LUB.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Luby's, Inc. (NYSE:LUB) but similarly valued. These stocks are Wireless Telecom Group, Inc. (NYSE:WTT), Kewaunee Scientific Corporation (NASDAQ:KEQU), Innodata Inc (NASDAQ:INOD), and Zomedica Pharmaceuticals Corp. (NYSE:ZOM). This group of stocks' market valuations resemble LUB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTT,2,991,0 KEQU,3,1614,0 INOD,3,782,1 ZOM,1,3,0 Average,2.25,848,0.25 [/table]
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in LUB's case. Kewaunee Scientific Corporation (NASDAQ:KEQU) is the most popular stock in this table. On the other hand Zomedica Pharmaceuticals Corp. (NYSE:ZOM) is the least popular one with only 1 bullish hedge fund positions. Luby's, Inc. (NYSE:LUB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on LUB, though not to the same extent, as the stock returned 19.4% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
