It’s Monday and multiple entertainment companies along with one energy company is trending. Specifically, traders are watching more closely Sony Corporation (NYSE:SNE), Amazon.com Inc. (NASDAQ:AMZN), Netflix Inc. (NASDAQ:NFLX), Laredo Petroleum Inc. (NYSE:LPI), and AMC Entertainment Holdings Inc. Class A (NYSE:AMC). Let’s analyze why each stock is trending and how some hedge funds are positioned among them.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). If you want to save $100, use the insider monkey discount code AA001 if you subscribe.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.
Sony Corporation (NYSE:SNE) is in the spotlight after Reuters reported that hedge fund manager Dan Loeb’s Third Point is building a position in the company and will ask for some changes including potentially exploring options for some business units including the movie studio. Loeb has targeted Sony before in the past six years. Reportedly, Loeb believes Amazon.com Inc. (NASDAQ:AMZN) and Netflix Inc. (NASDAQ:NFLX) might both be interested in potentially buying Sony’s film studio if it becomes available. Amazon needs more entertainment content to make its monthly Amazon Prime membership even more compelling. Netflix’s original content strategy has done wonders for its stock and having Sony’s film studio would obviously help it offer more content and potentially bring in more subscribers. Given the market cap of both companies, each has the firepower to buy Sony’s studio. If either two buy Sony’s film studio, the deal would cause Hollywood to become more internet based. In terms of Sony’s hedge fund activity, at Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. In terms of Amazon, heading into the first quarter of 2019, a total of 168 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the second quarter of 2018.
In terms of Netflix, at Q4’s end, a total of 83 of the hedge funds tracked by Insider Monkey were long this stock, a change of -1% from the second quarter of 2018. On the other hand, there were a total of 75 hedge funds with a bullish position in NFLX a year ago.
Laredo Petroleum Inc. (NYSE:LPI) shares have surged due to increased optimism and the rise in oil prices. As of 1 pm eastern time, crude oil futures are almost up 2%. Laredo’s business prospects are better if oil prices rise. Mackenzie B. Davis And Kenneth L. Settles Jr’s SailingStone Capital Partners decreased its stake by 3% in Q4 to 38.19 million shares.
AMC Entertainment Holdings Inc. Class A (NYSE:AMC) shares are up 8% after Eric Wold of Riley FBR said he’s ‘increasingly optimistic’ on AMC’s Stubs A-List EBITDA contribution. The subscription plan could help AMC’s efficiency and profitability down the road. The analyst has a $20 price target, up from the previous $18 price target. Jim Simons’ Renaissance Technologies increased its stake by 75% to over 1.8 million shares as of the end of December.
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