Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 30 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 6.7% through November 15th whereas the S&P 500 Index ETF gained only 2.6% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Loral Space & Communications Inc. (NASDAQ:LORL) from the perspective of those elite funds.
Loral Space & Communications Inc. (NASDAQ:LORL) was in 22 hedge funds’ portfolios at the end of the third quarter of 2018. LORL investors should pay attention to a decrease in hedge fund interest recently. There were 25 hedge funds in our database with LORL holdings at the end of the previous quarter. Our calculations also showed that LORL 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.
Let’s take a look at the new hedge fund action encompassing Loral Space & Communications Inc. (NASDAQ:LORL).
How are hedge funds trading Loral Space & Communications Inc. (NASDAQ:LORL)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in LORL heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, MHR Fund Management, managed by Mark Rachesky, holds the largest position in Loral Space & Communications Inc. (NASDAQ:LORL). MHR Fund Management has a $387.2 million position in the stock, comprising 20.6% of its 13F portfolio. Sitting at the No. 2 spot is Highland Capital Management, managed by James Dondero, which holds a $91.5 million position; 5% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions comprise Christopher Pucillo’s Solus Alternative Asset Management, Leon Cooperman’s Omega Advisors and Mario Gabelli’s GAMCO Investors.
Judging by the fact that Loral Space & Communications Inc. (NASDAQ:LORL) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that elected to cut their full holdings last quarter. Intriguingly, Zach Schreiber’s Point State Capital cut the largest investment of the 700 funds watched by Insider Monkey, totaling about $4.5 million in stock, and Adam Fox and Samuel Elder’s Altalis Capital Partners was right behind this move, as the fund said goodbye to about $2.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Loral Space & Communications Inc. (NASDAQ:LORL) but similarly valued. We will take a look at Noble Midstream Partners LP (NYSE:NBLX), Pretium Resources Inc (NYSE:PVG), Sandy Spring Bancorp Inc. (NASDAQ:SASR), and Web.com Group, Inc. (NYSE:WEB). This group of stocks’ market values match LORL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NBLX | 6 | 30203 | 2 |
| PVG | 17 | 96787 | 2 |
| SASR | 12 | 90603 | -1 |
| WEB | 24 | 481203 | 1 |
| Average | 14.75 | 174699 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $701 million in LORL’s case. Web.com Group, Inc. (NYSE:WEB) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 6 bullish hedge fund positions. Loral Space & Communications Inc. (NASDAQ:LORL) 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 WEB might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
