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Were Hedge Funds Right About Comcast Corporation (CMCSA)?

Debasis Saha
·6 min read

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 823 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Comcast Corporation (NASDAQ:CMCSA).

Comcast Corporation (NASDAQ:CMCSA) investors should be aware of a decrease in activity from the world's largest hedge funds recently. Comcast Corporation (NASDAQ:CMCSA) was in 80 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 105. Our calculations also showed that CMCSA isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

If you'd ask most investors, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the bigwigs of this club, around 850 funds. These investment experts preside over the lion's share of the hedge fund industry's total asset base, and by monitoring their best picks, Insider Monkey has found several investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Steven Cohen
Steven Cohen

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let's take a glance at the latest hedge fund action surrounding Comcast Corporation (NASDAQ:CMCSA).

How have hedgies been trading Comcast Corporation (NASDAQ:CMCSA)?

At Q2's end, a total of 80 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. By comparison, 86 hedge funds held shares or bullish call options in CMCSA a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is CMCSA A Good Stock To Buy?
Is CMCSA A Good Stock To Buy?

Among these funds, Eagle Capital Management held the most valuable stake in Comcast Corporation (NASDAQ:CMCSA), which was worth $1834.6 million at the end of the third quarter. On the second spot was Viking Global which amassed $1111.9 million worth of shares. Orbis Investment Management, First Pacific Advisors LLC, and Soroban Capital Partners 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 3G Sahana Capital Management allocated the biggest weight to Comcast Corporation (NASDAQ:CMCSA), around 31.29% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, earmarking 18.93 percent of its 13F equity portfolio to CMCSA.

Seeing as Comcast Corporation (NASDAQ:CMCSA) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds who were dropping their entire stakes last quarter. It's worth mentioning that John Smith Clark's Southpoint Capital Advisors sold off the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $37.8 million in stock. James Parsons's fund, Junto Capital Management, also dropped its stock, about $34.5 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Comcast Corporation (NASDAQ:CMCSA) but similarly valued. These stocks are Toyota Motor Corporation (NYSE:TM), AbbVie Inc (NYSE:ABBV), Oracle Corporation (NASDAQ:ORCL), salesforce.com, inc. (NYSE:CRM), SAP SE (NYSE:SAP), Chevron Corporation (NYSE:CVX), and Abbott Laboratories (NYSE:ABT). All of these stocks' market caps are similar to CMCSA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TM,13,719379,2 ABBV,89,6226917,8 ORCL,49,2312027,1 CRM,107,9769139,-10 SAP,16,1253641,1 CVX,50,1585417,-3 ABT,67,3504346,5 Average,55.9,3624409,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 55.9 hedge funds with bullish positions and the average amount invested in these stocks was $3624 million. That figure was $7207 million in CMCSA's case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 13 bullish hedge fund positions. Comcast Corporation (NASDAQ:CMCSA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMCSA is 60.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Hedge funds were also right about betting on CMCSA as the stock returned 17.5% since the end of Q2 (through 10/16) 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.

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