Is LINX Stock A Buy?
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 of 2021. One of these stocks was Linx S.A. (NYSE:LINX).
Is LINX stock a buy? Linx S.A. (NYSE:LINX) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 14. LINX investors should pay attention to a decrease in support from the world's most elite money managers lately. There were 6 hedge funds in our database with LINX holdings at the end of December. Our calculations also showed that LINX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chase Coleman of Tiger Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Keeping this in mind let's check out the fresh hedge fund action surrounding Linx S.A. (NYSE:LINX).
Do Hedge Funds Think LINX Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in LINX over the last 23 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, Tiger Global Management LLC was the largest shareholder of Linx S.A. (NYSE:LINX), with a stake worth $22.2 million reported as of the end of March. Trailing Tiger Global Management LLC was Millennium Management, which amassed a stake valued at $10.3 million. Centiva Capital was 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 Tiger Global Management LLC allocated the biggest weight to Linx S.A. (NYSE:LINX), around 0.05% of its 13F portfolio. Centiva Capital is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to LINX.
Judging by the fact that Linx S.A. (NYSE:LINX) has witnessed a decline in interest from the aggregate hedge fund industry, it's safe to say that there were a few fund managers that slashed their full holdings by the end of the first quarter. At the top of the heap, Crispin Odey's Odey Asset Management Group sold off the largest stake of the "upper crust" of funds followed by Insider Monkey, totaling close to $1.4 million in stock. Julian Robertson's fund, Tiger Management, also dropped its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Linx S.A. (NYSE:LINX) but similarly valued. We will take a look at Sturm, Ruger & Company, Inc. (NYSE:RGR), 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT), Vermilion Energy Inc (NYSE:VET), QAD Inc. (NASDAQ:QADA), The Chefs Warehouse, Inc (NASDAQ:CHEF), NexPoint Residential Trust Inc (NYSE:NXRT), and MagnaChip Semiconductor Corporation (NYSE:MX). This group of stocks' market caps match LINX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RGR,21,135456,4 FDMT,18,397954,-6 VET,10,25503,0 QADA,14,161878,-1 CHEF,15,119611,-1 NXRT,9,31370,-1 MX,30,344567,2 Average,16.7,173763,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $33 million in LINX's case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand NexPoint Residential Trust Inc (NYSE:NXRT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Linx S.A. (NYSE:LINX) is even less popular than NXRT. Our overall hedge fund sentiment score for LINX is 8.4. 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. Hedge funds clearly dropped the ball on LINX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on LINX as the stock returned 10.7% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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