Hedge Funds Aren’t Crazy About Discovery Communications Inc. (DISCK) Anymore

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Discovery Communications Inc. (NASDAQ:DISCK) in this article.

Is Discovery Communications Inc. (NASDAQ:DISCK) worth your attention right now? The smart money is becoming less hopeful. The number of long hedge fund bets retreated by 3 lately. DISCK was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. There were 24 hedge funds in our database with DISCK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Celanese Corporation (NYSE:CE), Hologic, Inc. (NASDAQ:HOLX), and Philippine Long Distance Telephone (ADR) (NYSE:PHI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with Discovery Communications Inc. (NASDAQ:DISCK)?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 13% drop from the previous quarter. Hedge fund ownership has mostly trended down over the last year, hitting a yearly low at the end of September. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Manor Road Capital Partners, managed by John Ku, holds the largest position in Discovery Communications Inc. (NASDAQ:DISCK). Manor Road Capital Partners has a $73.7 million position in the stock, comprising 10.2% of its 13F portfolio. Coming in second is Wallace Weitz of Wallace R. Weitz & Co., with a $57.2 million position; 2.1% of its 13F portfolio is allocated to the company. Remaining peers that are bullish encompass Mario Gabelli’s GAMCO Investors, Tom Gayner’s Markel Gayner Asset Management and Edward Goodnow’s Goodnow Investment Group.

Because Discovery Communications Inc. (NASDAQ:DISCK) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds who were dropping their full holdings by the end of the third quarter. At the top of the heap, Bart Baum’s Ionic Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, worth close to $4.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $3.9 million worth of shares. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Discovery Communications Inc. (NASDAQ:DISCK) but similarly valued. We will take a look at Celanese Corporation (NYSE:CE), Hologic, Inc. (NASDAQ:HOLX), Philippine Long Distance Telephone (ADR) (NYSE:PHI), and Xerox Corporation (NYSE:XRX). This group of stocks’ market values resemble DISCK’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $804 million. That figure was $280 million in DISCK’s case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Philippine Long Distance Telephone (ADR) (NYSE:PHI) is the least popular one with only 4 bullish hedge fund positions. Discovery Communications Inc. (NASDAQ:DISCK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HOLX might be a better candidate to consider for a long position.

Disclosure: None