In this article we will analyze whether Liberty Latin America Ltd. (NASDAQ:LILA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is LILA a good stock to buy now? Liberty Latin America Ltd. (NASDAQ:LILA) has experienced an increase in hedge fund interest lately. Liberty Latin America Ltd. (NASDAQ:LILA) was in 17 hedge funds' portfolios at the end of September. The all time high for this statistic is 51. Our calculations also showed that LILA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Isaac of Arbiter Partners Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's view the key hedge fund action regarding Liberty Latin America Ltd. (NASDAQ:LILA).
Do Hedge Funds Think LILA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in LILA a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Ashe Capital was the largest shareholder of Liberty Latin America Ltd. (NASDAQ:LILA), with a stake worth $38.1 million reported as of the end of September. Trailing Ashe Capital was Berkshire Hathaway, which amassed a stake valued at $21.7 million. Quaker Capital Investments, Bill & Melinda Gates Foundation Trust, and Two Creeks 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 Quaker Capital Investments allocated the biggest weight to Liberty Latin America Ltd. (NASDAQ:LILA), around 3.08% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, designating 2.77 percent of its 13F equity portfolio to LILA.
Now, key hedge funds have been driving this bullishness. Arbiter Partners Capital Management, managed by Paul J. Isaac, established the biggest position in Liberty Latin America Ltd. (NASDAQ:LILA). Arbiter Partners Capital Management had $1.4 million invested in the company at the end of the quarter. Michael Burry's Scion Asset Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Andrew Hahn's Ursa Fund Management.
Let's now take a look at hedge fund activity in other stocks similar to Liberty Latin America Ltd. (NASDAQ:LILA). We will take a look at Ameris Bancorp (NASDAQ:ABCB), Omega Flex, Inc. (NASDAQ:OFLX), NetScout Systems, Inc. (NASDAQ:NTCT), Washington Federal Inc. (NASDAQ:WAFD), AssetMark Financial Holdings, Inc. (NYSE:AMK), Helmerich & Payne, Inc. (NYSE:HP), and Spirit Airlines Incorporated (NYSE:SAVE). This group of stocks' market caps match LILA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABCB,13,79345,-4 OFLX,4,5878,0 NTCT,11,103777,-5 WAFD,16,59276,2 AMK,10,38377,4 HP,31,165514,-2 SAVE,27,156821,4 Average,16,86998,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $84 million in LILA's case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 4 bullish hedge fund positions. Liberty Latin America Ltd. (NASDAQ:LILA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LILA is 41.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on LILA as the stock returned 40% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.