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Did Hedge Funds Drop The Ball On DISH Network Corp. (DISH) ?

Abigail Fisher

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

DISH Network Corp. (NASDAQ:DISH) was in 37 hedge funds' portfolios at the end of the fourth quarter of 2018. DISH has seen a decrease in hedge fund sentiment of late. There were 41 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.

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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We're going to take a gander at the new hedge fund action surrounding DISH Network Corp. (NASDAQ:DISH).

How have hedgies been trading DISH Network Corp. (NASDAQ:DISH)?

At Q4's end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DISH over the last 14 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.

DISH_mar2019

When looking at the institutional investors followed by Insider Monkey, Boykin Curry's Eagle Capital Management has the biggest position in DISH Network Corp. (NASDAQ:DISH), worth close to $345.7 million, amounting to 1.4% of its total 13F portfolio. The second largest stake is held by Paulson & Co, managed by John Paulson, which holds a $124.2 million position; 3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Scott Bessent's Key Square Capital Management, Mario Gabelli's GAMCO Investors and Matthew Knauer and Mina Faltas's Nokota Management.

Seeing as DISH Network Corp. (NASDAQ:DISH) has witnessed bearish sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of funds who were dropping their full holdings in the third quarter. At the top of the heap, James Dinan's York Capital Management cut the biggest investment of all the hedgies watched by Insider Monkey, worth close to $29.8 million in stock. Leon Cooperman's fund, Omega Advisors, also sold off its stock, about $26.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to DISH Network Corp. (NASDAQ:DISH). These stocks are Keysight Technologies Inc (NYSE:KEYS), Gartner Inc (NYSE:IT), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), and Elanco Animal Health Incorporated (NYSE:ELAN). This group of stocks' market values resemble DISH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KEYS,34,697709,5 IT,21,1059737,8 CHRW,27,396856,-1 ELAN,18,143574,-18 Average,25,574469,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $574 million. That figure was $1274 million in DISH's case. Keysight Technologies Inc (NYSE:KEYS) is the most popular stock in this table. On the other hand Elanco Animal Health Incorporated (NYSE:ELAN) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks DISH Network Corp. (NASDAQ:DISH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on DISH as the stock returned 30.4% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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