During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Liberty Broadband Corp (NASDAQ:LBRDA) and see how the stock is affected by the recent hedge fund activity.
Liberty Broadband Corp (NASDAQ:LBRDA) investors should pay attention to a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that LBRDA isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to analyze the latest hedge fund action surrounding Liberty Broadband Corp (NASDAQ:LBRDA).
How are hedge funds trading Liberty Broadband Corp (NASDAQ:LBRDA)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in LBRDA a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, FPR Partners, managed by Bob Peck and Andy Raab, holds the largest position in Liberty Broadband Corp (NASDAQ:LBRDA). FPR Partners has a $99.9 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Boykin Curry of Eagle Capital Management, with a $86.2 million position; 0.4% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish include D. E. Shaw's D E Shaw, William Crowley, William Harker, and Stephen Blass's Ashe Capital and Roberto Mignone's Bridger Management.
Since Liberty Broadband Corp (NASDAQ:LBRDA) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q3. Intriguingly, Michael Pausic's Foxhaven Asset Management sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising about $23.2 million in stock, and Jim Simons's Renaissance Technologies was right behind this move, as the fund said goodbye to about $3.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q3.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Liberty Broadband Corp (NASDAQ:LBRDA) but similarly valued. These stocks are Magellan Midstream Partners, L.P. (NYSE:MMP), Weibo Corp (NASDAQ:WB), MSCI Inc (NYSE:MSCI), and Veeva Systems Inc (NYSE:VEEV). This group of 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 MMP,12,86141,-2 WB,17,349440,-6 MSCI,38,594822,2 VEEV,31,519680,0 Average,24.5,387521,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $388 million. That figure was $499 million in LBRDA's case. MSCI Inc (NYSE:MSCI) is the most popular stock in this table. On the other hand Magellan Midstream Partners, L.P. (NYSE:MMP) is the least popular one with only 12 bullish hedge fund positions. Liberty Broadband Corp (NASDAQ:LBRDA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. A few hedge funds were also right about betting on Liberty Broadband as the stock returned 14.6% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.
Disclosure: None. This article was originally published at Insider Monkey.