At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The Liberty SiriusXM Group (NASDAQ:LSXMA) at the end of the first quarter and determine whether the smart money was really smart about this stock.
The Liberty SiriusXM Group (NASDAQ:LSXMA) was in 48 hedge funds' portfolios at the end of March. LSXMA investors should be aware of a decrease in support from the world's most elite money managers of late. There were 50 hedge funds in our database with LSXMA positions at the end of the previous quarter. Our calculations also showed that LSXMA isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_339344" align="aligncenter" width="400"] William Martin of Raging Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the new hedge fund action regarding The Liberty SiriusXM Group (NASDAQ:LSXMA).
What have hedge funds been doing with The Liberty SiriusXM Group (NASDAQ:LSXMA)?
At the end of the first quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LSXMA over the last 18 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in The Liberty SiriusXM Group (NASDAQ:LSXMA) was held by Berkshire Hathaway, which reported holding $470.9 million worth of stock at the end of September. It was followed by D E Shaw with a $125.1 million position. Other investors bullish on the company included FPR Partners, Citadel Investment Group, and Foxhaven Asset Management. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to The Liberty SiriusXM Group (NASDAQ:LSXMA), around 4.12% of its 13F portfolio. Act II Capital is also relatively very bullish on the stock, earmarking 3.68 percent of its 13F equity portfolio to LSXMA.
Seeing as The Liberty SiriusXM Group (NASDAQ:LSXMA) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that slashed their full holdings heading into Q4. It's worth mentioning that Noah Levy and Eugene Dozortsev's Newtyn Management cut the largest investment of the "upper crust" of funds watched by Insider Monkey, comprising about $34.1 million in stock, and Doug Silverman and Alexander Klabin's Senator Investment Group was right behind this move, as the fund dumped about $30.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
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. These stocks are Loews Corporation (NYSE:L), W.P. Carey Inc. (NYSE:WPC), Ventas, Inc. (NYSE:VTR), and Godaddy Inc (NYSE:GDDY). 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 L,21,107581,-3 WPC,22,33963,1 VTR,25,337381,-4 GDDY,54,2247882,3 Average,30.5,681702,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $682 million. That figure was $1088 million in LSXMA's case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 21 bullish hedge fund positions. The Liberty SiriusXM Group (NASDAQ:LSXMA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately LSXMA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on LSXMA were disappointed as the stock returned 10.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.