The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31 holdings, data that is available nowhere else. Should you consider Discovery, Inc. (NASDAQ:DISCK) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Discovery, Inc. (NASDAQ:DISCK) was in 26 hedge funds' portfolios at the end of the first quarter of 2019. DISCK has experienced a decrease in hedge fund sentiment recently. There were 34 hedge funds in our database with DISCK positions at the end of the previous quarter. Our calculations also showed that DISCK isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's review the fresh hedge fund action encompassing Discovery, Inc. (NASDAQ:DISCK).
What does the smart money think about Discovery, Inc. (NASDAQ:DISCK)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in DISCK a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Paulson & Co, managed by John Paulson, holds the most valuable position in Discovery, Inc. (NASDAQ:DISCK). Paulson & Co has a $277.7 million position in the stock, comprising 6.1% of its 13F portfolio. Sitting at the No. 2 spot is CQS Cayman LP, led by Michael Hintze, holding a $113.9 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Ken Griffin's Citadel Investment Group, Sander Gerber's Hudson Bay Capital Management and Mario Gabelli's GAMCO Investors.
Seeing as Discovery, Inc. (NASDAQ:DISCK) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedgies that elected to cut their entire stakes in the third quarter. Interestingly, Clint Carlson's Carlson Capital said goodbye to the biggest investment of the "upper crust" of funds tracked by Insider Monkey, valued at about $20.8 million in stock. Scott Wallace's fund, Wallace Capital Management, also dumped its stock, about $11.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 8 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Discovery, Inc. (NASDAQ:DISCK) but similarly valued. We will take a look at KLA-Tencor Corporation (NASDAQ:KLAC), Fifth Third Bancorp (NASDAQ:FITB), Ball Corporation (NYSE:BLL), and Sasol Limited (NYSE:SSL). This group of stocks' market caps are closest to DISCK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KLAC,41,642826,8 FITB,38,1120818,7 BLL,27,324081,-6 SSL,5,18378,-2 Average,27.75,526526,1.75 [/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 $527 million. That figure was $656 million in DISCK's case. KLA-Tencor Corporation (NASDAQ:KLAC) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 5 bullish hedge fund positions. Discovery, Inc. (NASDAQ:DISCK) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on DISCK, though not to the same extent, as the stock returned 0.8% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.