In this article we will take a look at whether hedge funds think Qurate Retail, Inc. (NASDAQ:QRTEA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Qurate Retail, Inc. (NASDAQ:QRTEA) worth your attention right now? Prominent investors are turning less bullish. The number of long hedge fund bets were cut by 7 in recent months. Our calculations also showed that QRTEA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). QRTEA was in 32 hedge funds' portfolios at the end of the first quarter of 2020. There were 39 hedge funds in our database with QRTEA positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 51 percentage points since March 2017 (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.
[caption id="attachment_364869" align="aligncenter" width="391"] Thomas Bancroft of Makaira Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's go over the fresh hedge fund action regarding Qurate Retail, Inc. (NASDAQ:QRTEA).
How are hedge funds trading Qurate Retail, Inc. (NASDAQ:QRTEA)?
Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in QRTEA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, FPR Partners was the largest shareholder of Qurate Retail, Inc. (NASDAQ:QRTEA), with a stake worth $124.5 million reported as of the end of September. Trailing FPR Partners was Lyrical Asset Management, which amassed a stake valued at $78.2 million. AQR Capital Management, Yacktman Asset Management, 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 9.87% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, designating 7.9 percent of its 13F equity portfolio to QRTEA.
Judging by the fact that Qurate Retail, Inc. (NASDAQ:QRTEA) has faced declining sentiment from hedge fund managers, we can see that there is a sect of funds that slashed their full holdings heading into Q4. At the top of the heap, Renaissance Technologies dropped the largest stake of the 750 funds watched by Insider Monkey, comprising an estimated $20.7 million in stock. Jeffrey Bronchick's fund, Cove Street Capital, also dumped its stock, about $17.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 7 funds heading into Q4.
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 Lexington Realty Trust (NYSE:LXP), Air Lease Corp (NYSE:AL), Blackstone Mortgage Trust Inc (NYSE:BXMT), and United States Cellular Corporation (NYSE:USM). All of these stocks' market caps are closest to QRTEA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LXP,10,41143,-4 AL,20,378732,-3 BXMT,19,56818,4 USM,12,91991,-9 Average,15.25,142171,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $478 million in QRTEA's case. Air Lease Corp (NYSE:AL) is the most popular stock in this table. On the other hand Lexington Realty Trust (NYSE:LXP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Qurate Retail, Inc. (NASDAQ:QRTEA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on QRTEA as the stock returned 34.9% so far in Q2 (through the end of May) 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.