The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), and what that likely means for the prospects of the company and its stock.
Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) was in 23 hedge funds' portfolios at the end of the third quarter of 2018. LTRPA has seen an increase in activity from the world's largest hedge funds of late. There were 21 hedge funds in our database with LTRPA positions at the end of the previous quarter. Our calculations also showed that LTRPA isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the recent hedge fund action encompassing Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA).
Hedge fund activity in Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA)
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in LTRPA at the beginning of this year. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Eagle Capital Management was the largest shareholder of Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), with a stake worth $80.6 million reported as of the end of September. Trailing Eagle Capital Management was Hudson Bay Capital Management, which amassed a stake valued at $62.5 million. Empyrean Capital Partners, D E Shaw, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA). Marshall Wace LLP had $2.1 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $0.4 million position during the quarter. The other funds with brand new LTRPA positions are Mike Vranos's Ellington and Roger Ibbotson's Zebra Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA). We will take a look at First Majestic Silver Corp (NYSE:AG), Mercer International Inc. (NASDAQ:MERC), Nexeo Solutions, Inc. (NASDAQ:NXEO), and QAD Inc. (NASDAQ:QADA). This group of stocks' market valuations match LTRPA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AG,10,11509,3 MERC,19,215276,1 NXEO,30,531459,9 QADA,16,162775,1 Average,18.75,230255,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $304 million in LTRPA's case. Nexeo Solutions, Inc. (NASDAQ:NXEO) is the most popular stock in this table. On the other hand First Majestic Silver Corp (NYSE:AG) is the least popular one with only 10 bullish hedge fund positions. Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) 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 NXEO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.