Is Discovery, Inc. (NASDAQ:DISCA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Discovery, Inc. (NASDAQ:DISCA) a buy here? Investors who are in the know are turning less bullish. The number of bullish hedge fund positions were trimmed by 2 recently. Our calculations also showed that DISCA isn't among the 30 most popular stocks among hedge funds (see the video below). DISCA was in 24 hedge funds' portfolios at the end of the second quarter of 2019. There were 26 hedge funds in our database with DISCA holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most investors, hedge funds are perceived as underperforming, outdated financial tools of the past. While there are greater than 8000 funds trading today, Our experts choose to focus on the upper echelon of this group, approximately 750 funds. These money managers control the majority of the hedge fund industry's total asset base, and by tailing their best picks, Insider Monkey has identified numerous investment strategies that have historically outrun Mr. Market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the recent hedge fund action surrounding Discovery, Inc. (NASDAQ:DISCA).
What have hedge funds been doing with Discovery, Inc. (NASDAQ:DISCA)?
At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in DISCA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Discovery, Inc. (NASDAQ:DISCA) was held by Citadel Investment Group, which reported holding $72.8 million worth of stock at the end of March. It was followed by Miller Value Partners with a $50.9 million position. Other investors bullish on the company included GAMCO Investors, GoldenTree Asset Management, and Zimmer Partners.
Because Discovery, Inc. (NASDAQ:DISCA) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few fund managers that slashed their positions entirely in the second quarter. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest stake of the 750 funds followed by Insider Monkey, comprising close to $74.3 million in call options, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dumped about $25.9 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds in the second quarter.
Let's check out hedge fund activity in other stocks similar to Discovery, Inc. (NASDAQ:DISCA). We will take a look at PPL Corporation (NYSE:PPL), Stanley Black & Decker, Inc. (NYSE:SWK), Hormel Foods Corporation (NYSE:HRL), and Edison International (NYSE:EIX). All of these stocks' market caps are similar to DISCA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPL,20,857968,-2 SWK,27,1068040,-4 HRL,16,155140,1 EIX,33,1771587,6 Average,24,963184,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $963 million. That figure was $335 million in DISCA's case. Edison International (NYSE:EIX) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 16 bullish hedge fund positions. Discovery, Inc. (NASDAQ:DISCA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DISCA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DISCA investors were disappointed as the stock returned -13.3% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.