Is Discovery, Inc. (NASDAQ:DISCA) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
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.
We're going to take a peek at the fresh hedge fund action surrounding Discovery, Inc. (NASDAQ:DISCA).
What does the smart money think about Discovery, Inc. (NASDAQ:DISCA)?
Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DISCA over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Discovery, Inc. (NASDAQ:DISCA) was held by Citadel Investment Group, which reported holding $142.1 million worth of stock at the end of March. It was followed by Point72 Asset Management with a $74.3 million position. Other investors bullish on the company included GAMCO Investors, Point72 Asset Management, and Zimmer Partners.
As one would reasonably expect, specific money managers have jumped into Discovery, Inc. (NASDAQ:DISCA) headfirst. Point72 Asset Management, managed by Steve Cohen, created the biggest call position in Discovery, Inc. (NASDAQ:DISCA). Point72 Asset Management had $25.9 million invested in the company at the end of the quarter. Stuart J. Zimmer's Zimmer Partners also made a $17.6 million investment in the stock during the quarter. The following funds were also among the new DISCA investors: Nick Niell's Arrowgrass Capital Partners, Ward Davis and Brian Agnew's Caerus Global Investors, and Paul Tudor Jones's Tudor Investment Corp.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Discovery, Inc. (NASDAQ:DISCA) but similarly valued. These stocks are Discovery, Inc. (NASDAQ:DISCK), KLA-Tencor Corporation (NASDAQ:KLAC), Fifth Third Bancorp (NASDAQ:FITB), and Ball Corporation (NYSE:BLL). This group of stocks' market caps match DISCA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DISCK,26,655739,-8 KLAC,41,642826,8 FITB,38,1120818,7 BLL,27,324081,-6 Average,33,685866,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $373 million in DISCA's case. KLA-Tencor Corporation (NASDAQ:KLAC) is the most popular stock in this table. On the other hand Discovery, Inc. (NASDAQ:DISCK) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Discovery, Inc. (NASDAQ:DISCA) is even less popular than DISCK. 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 DISCA, though not to the same extent, as the stock returned 0.4% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.