We Put Discovery Communications Inc. (DISCA) Under the Hedge Fund Microscope

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Discovery Communications Inc. (NASDAQ:DISCA).

Is Discovery Communications Inc. (NASDAQ:DISCA) a splendid investment today? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions inched up by 1 recently. 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 Markel Corporation (NYSE:MKL), Citrix Systems, Inc. (NASDAQ:CTXS), and Realty Income Corp (NYSE:O) to gather more data points.

If you’d ask most market participants, hedge funds are seen as slow, old financial tools of years past. While there are over 8,000 funds trading at present, our researchers look at the aristocrats of this group, approximately 700 funds. Most estimates calculate that this group of people command the lion’s share of the smart money’s total asset base, and by tracking their first-class picks, Insider Monkey has revealed various investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s review the fresh action regarding Discovery Communications Inc. (NASDAQ:DISCA).

How have hedgies been trading Discovery Communications Inc. (NASDAQ:DISCA)?

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 5% rise from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, Boykin Curry’s Eagle Capital Management has the most valuable position in Discovery Communications Inc. (NASDAQ:DISCA), worth close to $123.1 million, amounting to 0.5% of its total 13F portfolio. The second-largest stake is held by D E Shaw, with a $91.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Wallace Weitz’s Wallace R. Weitz & Co., Mario Gabelli’s GAMCO Investors, and Murray Stahl’s Horizon Asset Management.

Consequently, specific money managers were leading the bulls’ herd. Wallace R. Weitz & Co. assembled the most valuable position in Discovery Communications Inc. (NASDAQ:DISCA). Wallace R. Weitz & Co. had $74.8 million invested in the company at the end of the quarter. Matthew Iorio’s White Elm Capital also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Neil Chriss’ Hutchin Hill Capital, Cliff Asness’ AQR Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Discovery Communications Inc. (NASDAQ:DISCA) but similarly valued. These stocks are Markel Corporation (NYSE:MKL), Citrix Systems, Inc. (NASDAQ:CTXS), Realty Income Corp (NYSE:O), and SanDisk Corporation (NASDAQ:SNDK). This group of stocks’ market caps match Discovery Communications Inc.’s market cap.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $834 million. That figure was $429 million in Discovery Communications Inc.’s case. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this table. On the other hand Realty Income Corp (NYSE:O) is the least popular one with only 13 bullish hedge fund positions. Discovery Communications Inc. (NASDAQ:DISCA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Citrix Systems, Inc. might be a better candidate to consider for a long position.