Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Liberty Broadband Corp (NASDAQ:LBRDK) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Liberty Broadband Corp (NASDAQ:LBRDK) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Liberty Broadband Corp (NASDAQ:LBRDA), Pembina Pipeline Corp (NYSE:PBA), and Fastenal Company (NASDAQ:FAST) to gather more data points. Our calculations also showed that LBRDK 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).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30602" align="alignnone" width="600"] Philippe Laffont of Coatue Management[/caption]
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 take a peek at the new hedge fund action surrounding Liberty Broadband Corp (NASDAQ:LBRDK).
How are hedge funds trading Liberty Broadband Corp (NASDAQ:LBRDK)?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 37 hedge funds with a bullish position in LBRDK 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.
According to Insider Monkey's hedge fund database, Philippe Laffont's Coatue Management has the most valuable position in Liberty Broadband Corp (NASDAQ:LBRDK), worth close to $842 million, comprising 7.2% of its total 13F portfolio. Sitting at the No. 2 spot is Soros Fund Management, led by George Soros, holding a $737.2 million position; 20.4% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions include Boykin Curry's Eagle Capital Management, Sharlyn C. Heslam's Stockbridge Partners and William Crowley, William Harker, and Stephen Blass's Ashe Capital. In terms of the portfolio weights assigned to each position Soros Fund Management allocated the biggest weight to Liberty Broadband Corp (NASDAQ:LBRDK), around 20.42% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, designating 16.36 percent of its 13F equity portfolio to LBRDK.
Since Liberty Broadband Corp (NASDAQ:LBRDK) has experienced falling interest from hedge fund managers, logic holds that there exists a select few funds that slashed their full holdings by the end of the third quarter. It's worth mentioning that Jonathan Auerbach's Hound Partners said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $44.6 million in stock. Jorge Paulo Lemann's fund, 3G Capital, also dropped its stock, about $12 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Liberty Broadband Corp (NASDAQ:LBRDK) but similarly valued. These stocks are Liberty Broadband Corp (NASDAQ:LBRDA), Pembina Pipeline Corp (NYSE:PBA), Fastenal Company (NASDAQ:FAST), and ANSYS, Inc. (NASDAQ:ANSS). This group of stocks' market caps are similar to LBRDK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBRDA,21,694238,1 PBA,10,101496,-2 FAST,28,1046417,-1 ANSS,28,882714,3 Average,21.75,681216,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $3494 million in LBRDK's case. Fastenal Company (NASDAQ:FAST) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Liberty Broadband Corp (NASDAQ:LBRDK) is more popular among hedge funds. 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 LBRDK as the stock returned 72.3% so far in 2019 (through 12/23) 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.