Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Qurate Retail, Inc. (NASDAQ:QRTEA) changed recently.
To the average investor there are dozens of indicators stock market investors employ to evaluate publicly traded companies. A couple of the best indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top investment managers can outclass their index-focused peers by a significant amount (see the details here).
Let's view the fresh hedge fund action encompassing Qurate Retail, Inc. (NASDAQ:QRTEA).
What have hedge funds been doing with Qurate Retail, Inc. (NASDAQ:QRTEA)?
At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in QRTEA over the last 14 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, FPR Partners was the largest shareholder of Qurate Retail, Inc. (NASDAQ:QRTEA), with a stake worth $234 million reported as of the end of September. Trailing FPR Partners was Makaira Partners, which amassed a stake valued at $139.8 million. AQR Capital Management, International Value Advisers, and Ulysses Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Qurate Retail, Inc. (NASDAQ:QRTEA) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. At the top of the heap, Steven Boyd's Armistice Capital sold off the largest stake of all the hedgies tracked by Insider Monkey, totaling close to $20 million in stock. Steve Cohen's fund, Point72 Asset Management, also dumped its stock, about $7.3 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Qurate Retail, Inc. (NASDAQ:QRTEA). We will take a look at Open Text Corporation (NASDAQ:OTEX), PerkinElmer, Inc. (NYSE:PKI), Federal Realty Investment Trust (NYSE:FRT), and Equity Lifestyle Properties, Inc. (NYSE:ELS). This group of stocks' market valuations are similar to QRTEA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OTEX,20,617398,1 PKI,19,898510,-4 FRT,17,234541,-4 ELS,15,546977,1 Average,17.75,574357,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $574 million. That figure was $960 million in QRTEA's case. Open Text Corporation (NASDAQ:OTEX) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Qurate Retail, Inc. (NASDAQ:QRTEA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately QRTEA wasn't in this group. Hedge funds that bet on QRTEA were disappointed as the stock lost 12.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.