Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Liberty Broadband Corp (NASDAQ:LBRDA) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Liberty Broadband Corp (NASDAQ:LBRDA) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds' portfolios at the end of the fourth quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Twenty-First Century Fox Inc (NASDAQ:FOX), McCormick & Company, Incorporated (NYSE:MKC), and Northern Trust Corporation (NASDAQ:NTRS) to gather more data points. Our calculations also showed that LBRDA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_735677" align="aligncenter" width="400"] Sander Gerber of Hudson Bay Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a peek at the new hedge fund action regarding Liberty Broadband Corp (NASDAQ:LBRDA).
What have hedge funds been doing with Liberty Broadband Corp (NASDAQ:LBRDA)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LBRDA over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, FPR Partners held the most valuable stake in Liberty Broadband Corp (NASDAQ:LBRDA), which was worth $187.1 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $134.7 million worth of shares. Ashe Capital, D E Shaw, and Hudson Bay Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Liberty Broadband Corp (NASDAQ:LBRDA), around 9.76% of its 13F portfolio. Act II Capital is also relatively very bullish on the stock, setting aside 7.43 percent of its 13F equity portfolio to LBRDA.
Due to the fact that Liberty Broadband Corp (NASDAQ:LBRDA) has experienced a decline in interest from hedge fund managers, it's easy to see that there exists a select few hedgies that decided to sell off their full holdings heading into Q4. At the top of the heap, Perella Weinberg Partners sold off the largest stake of all the hedgies watched by Insider Monkey, comprising close to $5.1 million in stock. Ken Griffin's fund, Citadel Investment Group, also dropped its stock, about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Liberty Broadband Corp (NASDAQ:LBRDA). These stocks are Fox Corporation (NASDAQ:FOX), McCormick & Company, Incorporated (NYSE:MKC), Northern Trust Corporation (NASDAQ:NTRS), and Weyerhaeuser Co. (NYSE:WY). All of these stocks' market caps match LBRDA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOX,27,935717,-2 MKC,24,155508,-6 NTRS,35,485910,12 WY,30,323789,0 Average,29,475231,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $475 million. That figure was $821 million in LBRDA's case. Northern Trust Corporation (NASDAQ:NTRS) is the most popular stock in this table. On the other hand McCormick & Company, Incorporated (NYSE:MKC) 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 MKC. Hedge funds clearly dropped the ball on LBRDA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on LBRDA as the stock returned -11.2% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.