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Hedge Funds Soured On Qurate Retail, Inc. (QRTEA) At The Right Time

Reymerlyn Martin

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Qurate Retail, Inc. (NASDAQ:QRTEA).

Qurate Retail, Inc. (NASDAQ:QRTEA) investors should be aware of a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that QRTEA isn't among the 30 most popular stocks among hedge funds.

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 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.

Thomas Bancroft - Makaira Partners

We're going to take a peek at the recent hedge fund action surrounding Qurate Retail, Inc. (NASDAQ:QRTEA).

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

At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2018. On the other hand, there were a total of 34 hedge funds with a bullish position in QRTEA a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

QRTEA_jun2019

According to Insider Monkey's hedge fund database, Bob Peck and Andy Raab's FPR Partners has the most valuable position in Qurate Retail, Inc. (NASDAQ:QRTEA), worth close to $218.8 million, amounting to 5.3% of its total 13F portfolio. The second largest stake is held by Thomas Bancroft of Makaira Partners, with a $112 million position; the fund has 13.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Cliff Asness's AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Charles de Vaulx's International Value Advisers.

Seeing as Qurate Retail, Inc. (NASDAQ:QRTEA) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest investment of the "upper crust" of funds tracked by Insider Monkey, valued at about $29.2 million in stock, and Zachary Miller's Parian Global Management was right behind this move, as the fund dropped about $13.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Qurate Retail, Inc. (NASDAQ:QRTEA). These stocks are Five Below Inc (NASDAQ:FIVE), Teradyne, Inc. (NASDAQ:TER), Alaska Air Group, Inc. (NYSE:ALK), and Capri Holdings Limited (NYSE:CPRI). 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 FIVE,38,487778,6 TER,24,564379,-1 ALK,20,466021,-12 CPRI,37,1222168,4 Average,29.75,685087,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $726 million in QRTEA's case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Alaska Air Group, Inc. (NYSE:ALK) is the least popular one with only 20 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 -20% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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