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Were Hedge Funds Illusioned With The Liberty SiriusXM Group (LSXMA)?

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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Liberty SiriusXM Group (NASDAQ:LSXMA) and determine whether hedge funds had an edge regarding this stock.

The Liberty SiriusXM Group (NASDAQ:LSXMA) shareholders have witnessed an increase in enthusiasm from smart money recently. The Liberty SiriusXM Group (NASDAQ:LSXMA) was in 44 hedge funds' portfolios at the end of September. The all time high for this statistic is 50. Our calculations also showed that LSXMA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let's go over the new hedge fund action regarding The Liberty SiriusXM Group (NASDAQ:LSXMA).

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

Heading into the fourth quarter of 2021, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 42 hedge funds with a bullish position in LSXMA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is LSXMA A Good Stock To Buy?
Is LSXMA A Good Stock To Buy?

More specifically, Berkshire Hathaway was the largest shareholder of The Liberty SiriusXM Group (NASDAQ:LSXMA), with a stake worth $701 million reported as of the end of September. Trailing Berkshire Hathaway was Baupost Group, which amassed a stake valued at $207.5 million. D E Shaw, FPR Partners, and Corvex Capital 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 Isomer Partners allocated the biggest weight to The Liberty SiriusXM Group (NASDAQ:LSXMA), around 4.48% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, earmarking 3.75 percent of its 13F equity portfolio to LSXMA.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, established the most valuable position in The Liberty SiriusXM Group (NASDAQ:LSXMA). Senator Investment Group had $47.9 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $31.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon's Moore Global Investments, Jinghua Yan's TwinBeech Capital, and Greg Eisner's Engineers Gate Manager.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Liberty SiriusXM Group (NASDAQ:LSXMA) but similarly valued. We will take a look at Textron Inc. (NYSE:TXT), Brown & Brown, Inc. (NYSE:BRO), Omnicom Group Inc. (NYSE:OMC), Confluent Inc. (NASDAQ:CFLT), argenx SE (NASDAQ:ARGX), Novavax, Inc. (NASDAQ:NVAX), and Royalty Pharma Plc (NASDAQ:RPRX). This group of stocks' market valuations are similar to LSXMA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TXT,31,1137475,9 BRO,31,1392156,5 OMC,25,396360,-5 CFLT,27,1319263,27 ARGX,28,1364285,1 NVAX,35,786706,-2 RPRX,20,1961787,0 Average,28.1,1194005,5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $1194 million. That figure was $1901 million in LSXMA's case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Royalty Pharma Plc (NASDAQ:RPRX) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks The Liberty SiriusXM Group (NASDAQ:LSXMA) is more popular among hedge funds. Our overall hedge fund sentiment score for LSXMA is 82.4. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, LSXMA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LSXMA were disappointed as the stock returned -2% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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