Is LUMN Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Lumen Technologies, Inc. (NYSE:LUMN) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is LUMN stock a buy? Hedge funds were selling. The number of bullish hedge fund positions went down by 2 lately. Lumen Technologies, Inc. (NYSE:LUMN) was in 29 hedge funds’ portfolios at the end of December. The all time high for this statistic is 40. Our calculations also showed that LUMN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 31 hedge funds in our database with LUMN holdings at the end of September.

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Prem Watsa of Fairfax Financial Holdings

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Lumen Technologies, Inc. (NYSE:LUMN).

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Do Hedge Funds Think LUMN Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in LUMN a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Lumen Technologies, Inc. (NYSE:LUMN) was held by Southeastern Asset Management, which reported holding $634.8 million worth of stock at the end of December. It was followed by Millennium Management with a $27.7 million position. Other investors bullish on the company included Fairfax Financial Holdings, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Lumen Technologies, Inc. (NYSE:LUMN), around 14.18% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, earmarking 4.99 percent of its 13F equity portfolio to LUMN.

Since Lumen Technologies, Inc. (NYSE:LUMN) has witnessed falling interest from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes by the end of the fourth quarter. It’s worth mentioning that Philippe Laffont’s Coatue Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $7.2 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the fourth quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lumen Technologies, Inc. (NYSE:LUMN) but similarly valued. These stocks are Advance Auto Parts, Inc. (NYSE:AAP), Zynga Inc (NASDAQ:ZNGA), News Corp (NASDAQ:NWSA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Cna Financial Corporation (NYSE:CNA), News Corp (NASDAQ:NWS), and Lennox International Inc. (NYSE:LII). This group of stocks’ market valuations resemble LUMN’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAP,36,1352541,-6 ZNGA,52,1002909,4 NWSA,32,703034,1 TEVA,26,916076,-7 CNA,16,60793,-1 NWS,11,65562,-3 LII,27,353035,-7 Average,28.6,636279,-2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $772 million in LUMN’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 11 bullish hedge fund positions. Lumen Technologies, Inc. (NYSE:LUMN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LUMN is 46.7. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on LUMN as the stock returned 34.5% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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