It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Echostar Corporation (NASDAQ:SATS).
Echostar Corporation (NASDAQ:SATS) investors should be aware of an increase in enthusiasm from smart money lately. Our calculations also showed that SATS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Nathaniel August of Mangrove Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s take a look at the key hedge fund action encompassing Echostar Corporation (NASDAQ:SATS).
Hedge fund activity in Echostar Corporation (NASDAQ:SATS)
Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SATS over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the number one position in Echostar Corporation (NASDAQ:SATS). Renaissance Technologies has a $159.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Hound Partners, managed by Jonathan Auerbach, which holds a $112.4 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Nathaniel August’s Mangrove Partners, Jeffrey Tannenbaum’s Fir Tree and Peter S. Park’s Park West Asset Management. In terms of the portfolio weights assigned to each position Red Cedar Management allocated the biggest weight to Echostar Corporation (NASDAQ:SATS), around 10.04% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, dishing out 7.32 percent of its 13F equity portfolio to SATS.
Now, some big names were leading the bulls’ herd. Hound Partners, managed by Jonathan Auerbach, established the largest position in Echostar Corporation (NASDAQ:SATS). Hound Partners had $112.4 million invested in the company at the end of the quarter. David Rosen’s Rubric Capital Management also initiated a $21.2 million position during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, David Harding’s Winton Capital Management, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Echostar Corporation (NASDAQ:SATS). We will take a look at Schneider National, Inc. (NYSE:SNDR), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Switch, Inc. (NYSE:SWCH), and Mantech International Corp (NASDAQ:MANT). This group of stocks’ market values are closest to SATS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNDR | 17 | 127932 | -4 |
| ADPT | 21 | 2018148 | -17 |
| SWCH | 14 | 322417 | 1 |
| MANT | 14 | 17786 | 3 |
| Average | 16.5 | 621571 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $622 million. That figure was $602 million in SATS’s case. Adaptive Biotechnologies Corporation (NASDAQ:ADPT) is the most popular stock in this table. On the other hand Switch, Inc. (NYSE:SWCH) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Echostar Corporation (NASDAQ:SATS) 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. Hedge funds were also right about betting on SATS as the stock returned 45.5% in 2019 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
