Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Liberty Media Corporation (NASDAQ:FWONK).
Is Liberty Media Corporation (NASDAQ:FWONK) a healthy stock for your portfolio? The smart money is betting on the stock. The number of long hedge fund bets improved by 6 in recent months. Our calculations also showed that FWONK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind let’s view the recent hedge fund action regarding Liberty Media Corporation (NASDAQ:FWONK).
Hedge fund activity in Liberty Media Corporation (NASDAQ:FWONK)
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FWONK over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Liberty Media Corporation (NASDAQ:FWONK) was held by Viking Global, which reported holding $396.6 million worth of stock at the end of September. It was followed by Eminence Capital with a $390.5 million position. Other investors bullish on the company included Ashe Capital, OZ Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Liberty Media Corporation (NASDAQ:FWONK), around 18.19% of its 13F portfolio. Kontiki Capital is also relatively very bullish on the stock, earmarking 13.78 percent of its 13F equity portfolio to FWONK.
Now, some big names have been driving this bullishness. Freshford Capital Management, managed by Michael Doheny, created the largest position in Liberty Media Corporation (NASDAQ:FWONK). Freshford Capital Management had $18.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $17.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Mika Toikka’s AlphaCrest Capital Management, and Jaime Sterne’s Skye Global Management.
Let’s go over hedge fund activity in other stocks similar to Liberty Media Corporation (NASDAQ:FWONK). These stocks are Banco de Chile (NYSE:BCH), Packaging Corporation Of America (NYSE:PKG), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), and Insulet Corporation (NASDAQ:PODD). This group of stocks’ market values are closest to FWONK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCH | 10 | 53547 | 6 |
| PKG | 18 | 113206 | 1 |
| CHRW | 24 | 414912 | -2 |
| PODD | 34 | 731520 | -4 |
| Average | 21.5 | 328296 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $2063 million in FWONK’s case. Insulet Corporation (NASDAQ:PODD) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Liberty Media Corporation (NASDAQ:FWONK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately FWONK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FWONK were disappointed as the stock returned -55.4% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
