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How Did Qurate Retail, Inc. (QRTEA) Compare Against Hedge Fund Darlings in 2019?

Debasis Saha

Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31% through December 23rd. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Qurate Retail, Inc. (NASDAQ:QRTEA).

Qurate Retail, Inc. (NASDAQ:QRTEA) investors should pay attention to a decrease in hedge fund interest in recent months. Our calculations also showed that QRTEA 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).

In the financial world there are a lot of signals stock market investors have at their disposal to grade publicly traded companies. A couple of the best signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best money managers can outpace the S&P 500 by a healthy margin (see the details here).

[caption id="attachment_749689" align="alignnone" width="1600"] Christer Gardell of Cevian Capital[/caption]

Christer Gardell Cevian Capital

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 go over the latest hedge fund action encompassing Qurate Retail, Inc. (NASDAQ:QRTEA).

Hedge fund activity in Qurate Retail, Inc. (NASDAQ:QRTEA)

At Q3's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the second quarter of 2019. By comparison, 36 hedge funds held shares or bullish call options in QRTEA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is QRTEA A Good Stock To Buy?

Among these funds, FPR Partners held the most valuable stake in Qurate Retail, Inc. (NASDAQ:QRTEA), which was worth $211.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $125.6 million worth of shares. Lyrical Asset Management, International Value Advisers, and Makaira Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Makaira Partners allocated the biggest weight to Qurate Retail, Inc. (NASDAQ:QRTEA), around 7.74% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, setting aside 4.83 percent of its 13F equity portfolio to QRTEA.

Because Qurate Retail, Inc. (NASDAQ:QRTEA) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies who sold off their positions entirely last quarter. It's worth mentioning that Renaissance Technologies sold off the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $18 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dumped its stock, about $13.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Qurate Retail, Inc. (NASDAQ:QRTEA). We will take a look at The Stars Group Inc. (NASDAQ:TSG), Ritchie Bros. Auctioneers (NYSE:RBA), CIT Group Inc. (NYSE:CIT), and Six Flags Entertainment Corp (NYSE:SIX). This group of stocks' market caps match QRTEA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSG,34,717299,-4 RBA,13,185553,1 CIT,27,810397,2 SIX,37,639016,7 Average,27.75,588066,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $736 million in QRTEA's case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers (NYSE:RBA) is the least popular one with only 13 bullish hedge fund positions. Qurate Retail, Inc. (NASDAQ:QRTEA) 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. 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. Unfortunately QRTEA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on QRTEA were disappointed as the stock returned -58.3% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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