Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Liberty Global plc (NASDAQ:LBTYA).
Liberty Global plc (NASDAQ:LBTYA) was in 28 hedge funds' portfolios at the end of March. LBTYA investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 32 hedge funds in our database with LBTYA holdings at the end of the previous quarter. Our calculations also showed that LBTYA isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="473"] Matthew Hulsizer of PEAK6 Capital[/caption]
We're going to take a glance at the key hedge fund action regarding Liberty Global plc (NASDAQ:LBTYA).
What have hedge funds been doing with Liberty Global plc (NASDAQ:LBTYA)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in LBTYA 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 increasing their holdings significantly (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of Liberty Global plc (NASDAQ:LBTYA), with a stake worth $493.2 million reported as of the end of March. Trailing Berkshire Hathaway was Route One Investment Company, which amassed a stake valued at $222.6 million. Glenview Capital, Baupost Group, and Manor Road Capital Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Liberty Global plc (NASDAQ:LBTYA) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds that elected to cut their full holdings by the end of the third quarter. Interestingly, John H. Scully's SPO Advisory Corp dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $19.3 million in stock. Steve Cohen's fund, Point72 Asset Management, also cut its stock, about $5.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Liberty Global plc (NASDAQ:LBTYA) but similarly valued. These stocks are Veeva Systems Inc (NYSE:VEEV), Incyte Corporation (NASDAQ:INCY), ORIX Corporation (NYSE:IX), and Fastenal Company (NASDAQ:FAST). This group of stocks' market valuations resemble LBTYA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VEEV,27,654411,-4 INCY,39,3888539,5 IX,6,16223,-1 FAST,21,1144681,-4 Average,23.25,1425964,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $1426 million. That figure was $1332 million in LBTYA's case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Liberty Global plc (NASDAQ:LBTYA) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately LBTYA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LBTYA were disappointed as the stock returned -2.2% 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.