"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Echostar Corporation (NASDAQ:SATS).
Is Echostar Corporation (NASDAQ:SATS) a buy, sell, or hold? Hedge funds are buying. The number of long hedge fund bets rose by 2 recently. Our calculations also showed that SATS isn't among the 30 most popular stocks among hedge funds. SATS was in 28 hedge funds' portfolios at the end of the third quarter of 2018. There were 26 hedge funds in our database with SATS positions at the end of the previous quarter.
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 the 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 18 percentage points since May 2014 through December 3, 2018 (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 key hedge fund action regarding Echostar Corporation (NASDAQ:SATS).
Hedge fund activity in Echostar Corporation (NASDAQ:SATS)
Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SATS over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jim Simons's Renaissance Technologies has the largest position in Echostar Corporation (NASDAQ:SATS), worth close to $141.6 million, comprising 0.1% of its total 13F portfolio. On Renaissance Technologies's heels is Mangrove Partners, managed by Nathaniel August, which holds a $71.2 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Israel Englander's Millennium Management, Michael Lowenstein's Kensico Capital and Mario Gabelli's GAMCO Investors.
Consequently, key money managers were leading the bulls' herd. Rubric Capital Management, managed by David Rosen, assembled the most valuable position in Echostar Corporation (NASDAQ:SATS). Rubric Capital Management had $14.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $4.2 million position during the quarter. The other funds with brand new SATS positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Charles Paquelet's Skylands Capital, and Sean Murphy's Game Creek Capital.
Let's check out hedge fund activity in other stocks similar to Echostar Corporation (NASDAQ:SATS). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), BRF S.A. (NYSE:BRFS), Ciena Corporation (NASDAQ:CIEN), and Skechers USA Inc (NYSE:SKX). This group of stocks' market valuations match SATS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position URBN,31,425814,4 BRFS,10,50558,0 CIEN,25,327955,7 SKX,20,235713,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $443 million in SATS's case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand BRF S.A. (NYSE:BRFS) is the least popular one with only 10 bullish hedge fund positions. Echostar Corporation (NASDAQ:SATS) 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. In this regard URBN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.