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Liberty Broadband Corp (LBRDA) Fell Out Of Favor With Hedge Funds

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In this article you are going to find out whether hedge funds think Liberty Broadband Corp (NASDAQ:LBRDA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Liberty Broadband Corp (NASDAQ:LBRDA) undervalued? Investors who are in the know were becoming less confident. The number of long hedge fund positions went down by 3 recently. Liberty Broadband Corp (NASDAQ:LBRDA) was in 23 hedge funds' portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that LBRDA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Boykin Curry EAGLE CAPITAL MANAGEMENT
Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to analyze the recent hedge fund action regarding Liberty Broadband Corp (NASDAQ:LBRDA).

Do Hedge Funds Think LBRDA Is A Good Stock To Buy Now?

At first quarter's end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in LBRDA a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bob Peck and Andy Raab's FPR Partners has the number one position in Liberty Broadband Corp (NASDAQ:LBRDA), worth close to $185.3 million, comprising 5.1% of its total 13F portfolio. On FPR Partners's heels is Ashe Capital, led by William Crowley, William Harker, and Stephen Blass, holding a $142.3 million position; 9.7% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions comprise Boykin Curry's Eagle Capital Management, D. E. Shaw's D E Shaw and Michael Doheny's Freshford Capital Management. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Liberty Broadband Corp (NASDAQ:LBRDA), around 9.71% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, setting aside 8.88 percent of its 13F equity portfolio to LBRDA.

Seeing as Liberty Broadband Corp (NASDAQ:LBRDA) has faced bearish sentiment from the smart money, logic holds that there lies a certain "tier" of hedgies that slashed their entire stakes heading into Q2. At the top of the heap, Munir Javeri's 3G Sahana Capital Management dropped the biggest investment of all the hedgies followed by Insider Monkey, worth close to $19.8 million in stock. David Harding's fund, Winton Capital Management, also dropped its stock, about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q2.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Liberty Broadband Corp (NASDAQ:LBRDA) but similarly valued. We will take a look at Liberty Broadband Corp (NASDAQ:LBRDK), Discover Financial Services (NYSE:DFS), First Republic Bank (NYSE:FRC), ViacomCBS Inc. (NASDAQ:VIAC), Okta, Inc. (NASDAQ:OKTA), Fastenal Company (NASDAQ:FAST), and The Williams Companies, Inc. (NYSE:WMB). This group of stocks' market values match LBRDA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBRDK,70,6857308,-10 DFS,45,654294,2 FRC,41,1262066,7 VIAC,89,2349597,45 OKTA,48,1616565,-13 FAST,24,576286,-6 WMB,34,475466,-4 Average,50.1,1970226,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.1 hedge funds with bullish positions and the average amount invested in these stocks was $1970 million. That figure was $775 million in LBRDA's case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Fastenal Company (NASDAQ:FAST) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Liberty Broadband Corp (NASDAQ:LBRDA) is even less popular than FAST. Our overall hedge fund sentiment score for LBRDA is 25.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on LBRDA, though not to the same extent, as the stock returned 15.1% since the end of March (through July 16th) and outperformed the market as well.

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