At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Loral Space & Communications Inc (NASDAQ:LORL).
Loral Space & Communications Inc (NASDAQ:LORL) was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. LORL investors should be aware of an increase in hedge fund sentiment recently. There were 18 hedge funds in our database with LORL holdings at the end of the previous quarter. Our calculations also showed that LORL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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.
Mark Rachesky of MHR Fund Management
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 interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the new hedge fund action regarding Loral Space & Communications Inc (NASDAQ:LORL).
How are hedge funds trading Loral Space & Communications Inc (NASDAQ:LORL)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in LORL a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, MHR Fund Management held the most valuable stake in Loral Space & Communications Inc (NASDAQ:LORL), which was worth $138.6 million at the end of the third quarter. On the second spot was Highland Capital Management which amassed $23.5 million worth of shares. GAMCO Investors, OZ Management, and Solus Alternative Asset Management 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 Solus Alternative Asset Management allocated the biggest weight to Loral Space & Communications Inc (NASDAQ:LORL), around 29.94% of its 13F portfolio. MHR Fund Management is also relatively very bullish on the stock, designating 21.05 percent of its 13F equity portfolio to LORL.
As aggregate interest increased, some big names have jumped into Loral Space & Communications Inc (NASDAQ:LORL) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the largest position in Loral Space & Communications Inc (NASDAQ:LORL). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new LORL investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Michael M. Rothenberg’s Moab Capital Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Loral Space & Communications Inc (NASDAQ:LORL) but similarly valued. We will take a look at Preferred Bank (NASDAQ:PFBC), LeMaitre Vascular Inc (NASDAQ:LMAT), Camping World Holdings, Inc. (NYSE:CWH), and Live Oak Bancshares Inc (NASDAQ:LOB). This group of stocks’ market valuations are closest to LORL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFBC | 7 | 24634 | -4 |
| LMAT | 6 | 4580 | -3 |
| CWH | 16 | 67549 | 1 |
| LOB | 10 | 25016 | 0 |
| Average | 9.75 | 30445 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $224 million in LORL’s case. Camping World Holdings, Inc. (NYSE:CWH) is the most popular stock in this table. On the other hand LeMaitre Vascular Inc (NASDAQ:LMAT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Loral Space & Communications Inc (NASDAQ:LORL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on LORL as the stock returned 52.7% so far in Q2 (through June 22nd) 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.
Follow Loral Space & Communications Inc. (NASDAQ:LORL)
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Disclosure: None. This article was originally published at Insider Monkey.
