Hedge Funds Are Dumping Lands’ End, Inc. (LE)

Nina Todic

Updated Thu, Dec 20, 2018, 6:19 PM

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Lands' End, Inc. (NASDAQ:LE).

Lands' End, Inc. (NASDAQ:LE) has seen a decrease in support from the world's most elite money managers recently. LE was in 14 hedge funds' portfolios at the end of the third quarter of 2018. There were 16 hedge funds in our database with LE holdings at the end of the previous quarter. Our calculations also showed that le isn't among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

We're going to take a glance at the fresh hedge fund action surrounding Lands' End, Inc. (NASDAQ:LE).

Hedge fund activity in Lands' End, Inc. (NASDAQ:LE)

Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LE over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, ESL Investments was the largest shareholder of Lands' End, Inc. (NASDAQ:LE), with a stake worth $99.1 million reported as of the end of September. Trailing ESL Investments was Renaissance Technologies, which amassed a stake valued at $5 million. GAMCO Investors, Hawk Ridge Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Lands' End, Inc. (NASDAQ:LE) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q3. Intriguingly, Sander Gerber's Hudson Bay Capital Management dumped the largest position of the "upper crust" of funds watched by Insider Monkey, valued at close to $3.6 million in stock, and Chet Kapoor's Tenzing Global Investors was right behind this move, as the fund sold off about $2.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds heading into Q3.

Let's go over hedge fund activity in other stocks similar to Lands' End, Inc. (NASDAQ:LE). These stocks are Limelight Networks, Inc. (NASDAQ:LLNW), On Deck Capital Inc (NYSE:ONDK), Access National Corporation (NASDAQ:ANCX), and Community Healthcare Trust Inc (NYSE:CHCT). All of these stocks' market caps resemble LE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LLNW,17,43858,-1 ONDK,21,163797,4 ANCX,3,16165,0 CHCT,9,65636,-1 Average,12.5,72364,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $113 million in LE's case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Access National Corporation (NASDAQ:ANCX) is the least popular one with only 3 bullish hedge fund positions. Lands' End, Inc. (NASDAQ:LE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ONDK might be a better candidate to consider a long position.

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

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