Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Loral Space & Communications Inc. (NASDAQ:LORL), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Loral Space & Communications Inc. (NASDAQ:LORL) has seen a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that LORL isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's analyze the key hedge fund action encompassing Loral Space & Communications Inc. (NASDAQ:LORL).
What does smart money think about Loral Space & Communications Inc. (NASDAQ:LORL)?
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in LORL a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MHR Fund Management was the largest shareholder of Loral Space & Communications Inc. (NASDAQ:LORL), with a stake worth $294.4 million reported as of the end of March. Trailing MHR Fund Management was Highland Capital Management, which amassed a stake valued at $70.3 million. Solus Alternative Asset Management, GAMCO Investors, and OZ Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Loral Space & Communications Inc. (NASDAQ:LORL) has faced falling interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely by the end of the second quarter. At the top of the heap, Israel Englander's Millennium Management dumped the largest stake of the 750 funds tracked by Insider Monkey, worth about $0.4 million in stock. Frederick DiSanto's fund, Ancora Advisors, also cut its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Loral Space & Communications Inc. (NASDAQ:LORL) but similarly valued. We will take a look at Heritage Financial Corporation (NASDAQ:HFWA), Codexis, Inc. (NASDAQ:CDXS), Matthews International Corp (NASDAQ:MATW), and Apollo Investment Corp. (NASDAQ:AINV). This group of stocks' market caps match LORL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HFWA,9,46205,2 CDXS,12,305243,1 MATW,13,40498,1 AINV,6,30182,-3 Average,10,105532,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $514 million in LORL's case. Matthews International Corp (NASDAQ:MATW) is the most popular stock in this table. On the other hand Apollo Investment Corp. (NASDAQ:AINV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Loral Space & Communications Inc. (NASDAQ:LORL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LORL as the stock returned 20% during Q3 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.