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Hedge Funds Are Betting On The Liberty SiriusXM Group (LSXMK)

Nina Todic

We can judge whether The Liberty SiriusXM Group (NASDAQ:LSXMK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

The Liberty SiriusXM Group (NASDAQ:LSXMK) was in 44 hedge funds' portfolios at the end of the third quarter of 2019. LSXMK has experienced an increase in activity from the world's largest hedge funds of late. There were 42 hedge funds in our database with LSXMK holdings at the end of the previous quarter. Our calculations also showed that LSXMK 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 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 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 stocks that are in our short portfolio.

[caption id="attachment_332520" align="aligncenter" width="450"] Warren Buffett of Berkshire Hathaway[/caption]

Warren Buffett of Berkshire Hathaway

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the recent hedge fund action surrounding The Liberty SiriusXM Group (NASDAQ:LSXMK).

What have hedge funds been doing with The Liberty SiriusXM Group (NASDAQ:LSXMK)?

At Q3's end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 48 hedge funds held shares or bullish call options in LSXMK a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with LSXMK Positions

Among these funds, Berkshire Hathaway held the most valuable stake in The Liberty SiriusXM Group (NASDAQ:LSXMK), which was worth $1304.6 million at the end of the third quarter. On the second spot was FPR Partners which amassed $292.5 million worth of shares. D E Shaw, Dorsal Capital Management, and Citadel Investment Group 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 Steel Canyon Capital allocated the biggest weight to The Liberty SiriusXM Group (NASDAQ:LSXMK), around 20.97% of its portfolio. Simcoe Capital Management is also relatively very bullish on the stock, designating 7.6 percent of its 13F equity portfolio to LSXMK.

Consequently, key hedge funds were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the biggest position in The Liberty SiriusXM Group (NASDAQ:LSXMK). Adage Capital Management had $50.4 million invested in the company at the end of the quarter. Steve Pigott's Fort Baker Capital Management also made a $3.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The Liberty SiriusXM Group (NASDAQ:LSXMK) but similarly valued. These stocks are Kansas City Southern (NYSE:KSU), Discovery, Inc. (NASDAQ:DISCK), Burlington Stores Inc (NYSE:BURL), and W.R. Berkley Corporation (NYSE:WRB). All of these stocks' market caps are similar to LSXMK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KSU,28,550900,2 DISCK,30,727071,0 BURL,37,1512597,6 WRB,21,337881,-2 Average,29,782112,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $2853 million in LSXMK's case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand W.R. Berkley Corporation (NYSE:WRB) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks The Liberty SiriusXM Group (NASDAQ:LSXMK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on LSXMK as the stock returned 14.1% during Q4 (through 11/22) 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.

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