Lions Gate Entertainment Corp. (USA) (NYSE:LGF) shares have surged by 8% today after the entertainment company reported fourth quarter of fiscal year 2016 earnings of $0.07 per share on sales of $791.2 million, beating the consensus estimates by $0.09 and $50.53 million respectively. For the full 2016 fiscal year, the company reported sales of $2.35 billion, adjusted EBITDA of $162.3 million, and adjusted EPS of $0.86 per share. Although the company’s film releases weren’t as strong as previous years, the company’s slate for the 2016 calendar year is expected to be bigger and to generate more profit. The company’s backlog is also growing, with the film entertainment backlog rising by $0.2 billion quarter-over-quarter to $1.5 billion at the end of March.
We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity (see the details here). With this in mind, as the latest round of 13F filings has just ended, let’s examine the smart money sentiment towards Lions Gate Entertainment Corp. (USA) (NYSE:LGF).
Is Lions Gate Entertainment Corp. (USA) (NYSE:LGF) a marvelous investment now? Hedge funds are in an optimistic mood. The number of bullish hedge fund bets went up by 1 in the first quarter. LGF was in 32 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with LGF holdings at the end of the previous quarter. At the end of this article we will also compare LGF to other stocks including Telephone & Data Systems, Inc. (NYSE:TDS), Fitbit Inc (NYSE:FIT), and Kate Spade & Co (NYSE:KATE) to get a better sense of its popularity.
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When looking at the institutional investors followed by Insider Monkey, MHR Fund Management, managed by Mark Rachesky, holds the largest position in Lions Gate Entertainment Corp. (USA) (NYSE:LGF). MHR Fund Management has a $660.1 million position in the stock, comprising 53.5% of its 13F portfolio. The second most bullish fund manager is David Goel and Paul Ferri of Matrix Capital Management, with a $60.9 million position; 3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Barry Rosenstein’s JANA Partners, Curtis Macnguyen’s Ivory Capital, and Ricky Sandler’s Eminence Capital.
On the next page we’ll look at some funds that took up positions in Lions Gate during Q1, as well as compare the stock to a handful of others with similar market caps.
As industrywide interest jumped in Q1, some big names were leading the bulls’ herd. Ivory Capital assembled the largest position in Lions Gate Entertainment Corp. (USA) (NYSE:LGF). Ivory Capital had $24.5 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also initiated a $10.9 million position during the quarter. The following funds were also among the new LGF investors: Thomas E. Claugus’s GMT Capital, Solomon Kumin’s Folger Hill Asset Management, and Wallace Weitz’s Wallace R. Weitz & Co..
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lions Gate Entertainment Corp. (USA) (NYSE:LGF) but similarly valued. We will take a look at Telephone & Data Systems, Inc. (NYSE:TDS), Fitbit Inc (NYSE:FIT), Kate Spade & Co (NYSE:KATE), and Oceaneering International (NYSE:OII). All of these stocks’ market caps are similar to LGF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TDS | 21 | 310473 | -2 |
| FIT | 30 | 273921 | 3 |
| KATE | 32 | 694718 | -4 |
| OII | 24 | 196430 | 1 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $960 million in LGF’s case. Kate Spade & Co (NYSE:KATE) is the most popular stock in this table. On the other hand Telephone & Data Systems, Inc. (NYSE:TDS) is the least popular one with only 21 bullish hedge fund positions. Lions Gate Entertainment Corp. (USA) (NYSE:LGF) is not the most popular stock in this group but hedge fund interest is still above average and it has more money invested in it than any of the other stocks. Thus, it may be worth considering for a long-term holding.
Disclosure: None
