No one would be surprised at the statement that there is no “magic formula” for winning in the equity markets, save for Jim Simons and other billionaires, whose trading methods have delivered above-market returns for years. Individual investors usually invest in equities based on broker recommendations, analysts’ research reports, or even rumors or gut instincts. Picking good stocks is not an easy job, so experienced investors and especially less financially savvy ones should focus on the basket of stocks owned by hedge funds when looking for good investment opportunities. There are numerous complicated stock selection strategies, but exploring hedge funds’ top picks is definitely a good place to start looking for high-potential stocks. Having this in mind, the following article will take a close look at the hedge fund sentiment that surrounds LIBERTY GLOBAL PLC (NASDAQ:LBTYK).
Is LIBERTY GLOBAL PLC (NASDAQ:LBTYK) undervalued? The smart money is getting less optimistic. The number of long hedge fund bets was trimmed by 15 in recent months. LBTYK was in 74 hedge funds’ portfolios at the end of the fourth quarter of 2015. There were 89 hedge funds in our database with LBTYK holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stryker Corporation (NYSE:SYK), Las Vegas Sands Corp. (NYSE:LVS), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) to gather more data points.
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The class C ordinary shares of London-based communications company LIBERTY GLOBAL PLC (NASDAQ:LBTYK) are down by 30% over the past 12 months, after having dropped by 10% since the beginning of 2016. The international provider of video, broadband internet, fixed-line telephony and mobile services registered organic revenue generating units (RGUs) additions of 870,000 during 2015, with 344,000 additions in the fourth quarter alone. The company’s revenue for 2015 totaled $18.28 billion, up from $18.25 billion reported for 2014. Similarly, LIBERTY GLOBAL’s operating income increased to $2.35 billion from $2.23 billion registered in 2014. All in all, the company continues to grow its business operations at a steady pace. Nonetheless, the company has been facing extreme competition from incumbent telecommunications operators in some markets, especially in the Netherlands, so LIBERTY GLOBAL recently made a bright move to strengthen its position in that market by forming a joint venture with another operator.
Keeping this in mind, we’re going to take a look at the recent action regarding LIBERTY GLOBAL PLC (NASDAQ:LBTYK), as well as discuss the recently-announced joint venture.
In mid-February 2015, LIBERTY GLOBAL PLC (NASDAQ:LBTYK) and Vodafone Group Plc announced plans to merge their operating businesses in the Netherlands by forming a 50:50 joint venture. The freshly-announced joint venture combines Liberty’s Ziggo cable operations, which are scattered throughout the entire country, and Vodafone’s mobile operations. The new venture will continue to operate under the Vodafone and Ziggo brands, and will comprise more than 15 million subscribers. It should be mentioned that Vodafone represents the second-largest mobile network operator in the Netherlands, trailing state telecom firm KPN. Meanwhile, Liberty’s Ziggo represents the largest cable operator in the country, while KPN takes the second spot in this specific sector. More importantly, KPN is the largest Internet service provider in the Netherlands at the moment. However, LIBERTY GLOBAL PLC (NASDAQ:LBTYK) appears to be well-positioned to compete and gain market share in this highly-competitive market, thanks to the freshly-inked agreement.
How have hedgies been trading LIBERTY GLOBAL PLC (NASDAQ:LBTYK)?
At Q4’s end, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 17% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Boykin Curry’s Eagle Capital Management has the most valuable position in LIBERTY GLOBAL PLC (NASDAQ:LBTYK), worth close to $1.34 billion, comprising 5.5% of its total 13F portfolio. Sitting at the No. 2 spot is John H. Scully of SPO Advisory Corp, with a $680.5 million position; the fund has 11.9% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise First Eagle Investment Management, Lee Ainslie’s Maverick Capital and Lou Simpson’s SQ Advisors.
Judging by the fact that LIBERTY GLOBAL PLC (NASDAQ:LBTYK) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds who were dropping their entire stakes heading into 2016. Intriguingly, Doug Silverman and Alexander Klabin’s Senator Investment Group said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $114.9 million in stock. John Lykouretzos’ fund, Hoplite Capital Management, also dumped its stock, about $34.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 15 funds heading into 2016.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LIBERTY GLOBAL PLC (NASDAQ:LBTYK) but similarly valued. These stocks are Stryker Corporation (NYSE:SYK), Las Vegas Sands Corp. (NYSE:LVS), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Northrop Grumman Corporation (NYSE:NOC). This group of stocks’ market valuations resemble LBTYK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYK | 25 | 545635 | -1 |
| LVS | 24 | 291274 | -5 |
| VRX | 83 | 12555053 | -5 |
| NOC | 40 | 2257449 | 3 |
As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $3.91 billion. That figure was $8.05 billion in LBTYK’s case. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the most popular stock in this table. On the other hand Las Vegas Sands Corp. (NYSE:LVS) is the least popular one with only 24 bullish hedge fund positions. LIBERTY GLOBAL PLC (NASDAQ:LBTYK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal, but given that ownership of the stock among top investors declined greatly in the fourth quarter ahead of a 10% drop in shares so far in 2016, we’d recommend waiting for a rebound in investor sentiment before making a move on the stock.
Disclosure: None
