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Did Hedge Funds Drop The Ball On Echostar Corporation (SATS) ?

Nina Todic

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Echostar Corporation (NASDAQ:SATS) has seen a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that sats 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathaniel August - Mangrove Partners

We're going to take a look at the recent hedge fund action regarding Echostar Corporation (NASDAQ:SATS).

Hedge fund activity in Echostar Corporation (NASDAQ:SATS)

Heading into the second quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SATS over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SATS Positions

More specifically, Renaissance Technologies was the largest shareholder of Echostar Corporation (NASDAQ:SATS), with a stake worth $119.6 million reported as of the end of March. Trailing Renaissance Technologies was Mangrove Partners, which amassed a stake valued at $55.9 million. Park West Asset Management, Indaba Capital Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Because Echostar Corporation (NASDAQ:SATS) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few funds that decided to sell off their entire stakes last quarter. It's worth mentioning that Frederick DiSanto's Ancora Advisors dumped the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $9.2 million in stock, and Michael Lowenstein's Kensico Capital was right behind this move, as the fund sold off about $9.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Echostar Corporation (NASDAQ:SATS). These stocks are Sabra Health Care REIT Inc (NASDAQ:SBRA), Rexford Industrial Realty Inc (NYSE:REXR), Coherent, Inc. (NASDAQ:COHR), and F.N.B. Corp (NYSE:FNB). This group of stocks' market values resemble SATS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBRA,9,40738,-6 REXR,21,263571,3 COHR,14,201304,-3 FNB,23,87087,3 Average,16.75,148175,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $410 million in SATS's case. F.N.B. Corp (NYSE:FNB) is the most popular stock in this table. On the other hand Sabra Health Care REIT Inc (NASDAQ:SBRA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Echostar Corporation (NASDAQ:SATS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on SATS as the stock returned 17.4% during the same period 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.

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

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