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2019 Review: Most Favored Hedge Fund Stocks vs. DISH Network Corp. (DISH)

Abigail Fisher

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

DISH Network Corp. (NASDAQ:DISH) was in 36 hedge funds' portfolios at the end of September. DISH investors should pay attention to an increase in hedge fund sentiment recently. There were 32 hedge funds in our database with DISH positions at the end of the previous quarter. Our calculations also showed that DISH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_731853" align="aligncenter" width="473"] Scott Bessent of Key Square Capital Management[/caption]

Scott Bessent of Key Square Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to go over the recent hedge fund action surrounding DISH Network Corp. (NASDAQ:DISH).

What have hedge funds been doing with DISH Network Corp. (NASDAQ:DISH)?

At Q3's end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DISH over the last 17 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of DISH Network Corp. (NASDAQ:DISH), with a stake worth $474.4 million reported as of the end of September. Trailing Eagle Capital Management was King Street Capital, which amassed a stake valued at $441.7 million. Paulson & Co, Key Square Capital Management, and GAMCO Investors 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 King Street Capital allocated the biggest weight to DISH Network Corp. (NASDAQ:DISH), around 34.02% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, setting aside 26.48 percent of its 13F equity portfolio to DISH.

As aggregate interest increased, key money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in DISH Network Corp. (NASDAQ:DISH). Arrowstreet Capital had $23.1 million invested in the company at the end of the quarter. Alan Fournier's Pennant Capital Management also made a $8 million investment in the stock during the quarter. The other funds with brand new DISH positions are Carl Tiedemann and Michael Tiedemann's TIG Advisors, Ray Dalio's Bridgewater Associates, and David Costen Haley's HBK Investments.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as DISH Network Corp. (NASDAQ:DISH) but similarly valued. We will take a look at HEICO Corporation (NYSE:HEI), ZTO Express (Cayman) Inc. (NYSE:ZTO), Check Point Software Technologies Ltd. (NASDAQ:CHKP), and Arthur J. Gallagher & Co. (NYSE:AJG). This group of stocks' market caps resemble DISH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HEI,42,1148598,7 ZTO,19,505301,4 CHKP,20,407935,-4 AJG,23,286963,-2 Average,26,587199,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $1531 million in DISH's case. HEICO Corporation (NYSE:HEI) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 19 bullish hedge fund positions. DISH Network Corp. (NASDAQ:DISH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on DISH as the stock returned 43.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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