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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Qurate Retail, Inc. (NASDAQ:QRTEA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Qurate Retail, Inc. (NASDAQ:QRTEA) the right investment to pursue these days? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions advanced by 4 lately. Our calculations also showed that QRTEA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 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 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 stocks that are in our short portfolio.
Christer Gardell of Cevian Capital
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 we’re going to review the latest hedge fund action surrounding Qurate Retail, Inc. (NASDAQ:QRTEA).
What have hedge funds been doing with Qurate Retail, Inc. (NASDAQ:QRTEA)?
Heading into the first quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in QRTEA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, FPR Partners held the most valuable stake in Qurate Retail, Inc. (NASDAQ:QRTEA), which was worth $187.3 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $108.5 million worth of shares. AQR Capital Management, International Value Advisers, and Makaira Partners were 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 Makaira Partners allocated the biggest weight to Qurate Retail, Inc. (NASDAQ:QRTEA), around 9.25% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, setting aside 3.89 percent of its 13F equity portfolio to QRTEA.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, created the most outsized position in Qurate Retail, Inc. (NASDAQ:QRTEA). Renaissance Technologies had $20.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $9.3 million position during the quarter. The following funds were also among the new QRTEA investors: Stephen Mildenhall’s Contrarius Investment Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Philippe Laffont’s Coatue Management.
Let’s go over hedge fund activity in other stocks similar to Qurate Retail, Inc. (NASDAQ:QRTEA). We will take a look at Liberty Global PLC LiLAC Class A (NASDAQ:LILA), Compania Cervecerias Unidas S.A. (NYSE:CCU), Regal Beloit Corporation (NYSE:RBC), and Pebblebrook Hotel Trust (NYSE:PEB). This group of stocks’ market values are similar to QRTEA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LILA | 11 | 170779 | -3 |
| CCU | 8 | 40468 | -1 |
| RBC | 24 | 281179 | 4 |
| PEB | 22 | 215639 | 9 |
| Average | 16.25 | 177016 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $710 million in QRTEA’s case. Regal Beloit Corporation (NYSE:RBC) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Qurate Retail, Inc. (NASDAQ:QRTEA) 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 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately QRTEA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on QRTEA were disappointed as the stock returned -34.9% during the first two and a half months of 2020 (through March 25th) 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.
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.
