What Has Hedge Funds Fleeing From Starz (STRZA)?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Starz (NASDAQ:STRZA) the right pick for your portfolio? Prominent investors are getting less optimistic. The number of bullish hedge fund positions decreased by 7 in recent months. 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 Brandywine Realty Trust (NYSE:BDN), Mercury General Corporation (NYSE:MCY), and Cable One Inc (NYSE:CABO) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How are hedge funds trading Starz (NASDAQ:STRZA)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 20% drop from the previous quarter. That decline wiped out the gains in hedge fund ownership from the three previous quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Murray Stahl’s Horizon Asset Management has the most valuable position in Starz (NASDAQ:STRZA), worth close to $145.3 million, amounting to 4.1% of its total 13F portfolio. On Horizon Asset Management’s heels is Carlson Capital, led by Clint Carlson, holding a $114.5 million position; 1.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish comprise Curtis Macnguyen’s Ivory Capital (Investment Mgmt), Robert Emil Zoellner’s Alpine Associates, and David Forster and Peter Wilton’s IBIS Capital Partners.

Since Starz (NASDAQ:STRZA) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few hedge funds that slashed their full holdings by the end of the third quarter. Intriguingly, James Dinan’s York Capital Management dumped the largest position of the 700 funds monitored by Insider Monkey, comprising close to $42.9 million in stock. Nehal Chopra’s fund, Ratan Capital Group, also dumped its stock, about $38.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 7 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Starz (NASDAQ:STRZA) but similarly valued. These stocks are Brandywine Realty Trust (NYSE:BDN), Mercury General Corporation (NYSE:MCY), Cable One Inc (NYSE:CABO), and Chesapeake Energy Corporation (NYSE:CHK). This group of stocks’ market valuations are similar to STRZA’s market valuation.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $427 million. That figure was $470 million in STRZA’s case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand Mercury General Corporation (NYSE:MCY) is the least popular one with only 10 bullish hedge fund positions. Starz (NASDAQ:STRZA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CHK might be a better candidate to consider a long position in.

Disclosure: None