Time Warner Cable Inc (TWC), Virgin Media Inc. (VMED): Discovery Communications Inc. (DISCA): Are Hedge Funds Right About This Stock?

Discovery Communications Inc. (NASDAQ:DISCA) was in 15 hedge funds’ portfolio at the end of December. DISCA investors should pay attention to a decrease in enthusiasm from smart money recently. There were 15 hedge funds in our database with DISCA holdings at the end of the previous quarter. We’ll also take a look at a few key peers like Time Warner Cable Inc (NYSE:TWC), and Virgin Media Inc. (NASDAQ:VMED).

Discovery Communications Inc. (NASDAQ:DISCA)

To most stock holders, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are more than 8000 funds in operation at the moment, we look at the crème de la crème of this club, close to 450 funds. Most estimates calculate that this group has its hands on most of the smart money’s total capital, and by paying attention to their top stock picks, we have brought to light a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Just as important, bullish insider trading activity is a second way to parse down the investments you’re interested in. Just as you’d expect, there are lots of stimuli for an upper level exec to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this strategy if you know what to do (learn more here).

Keeping this in mind, let’s take a gander at the key action regarding Discovery Communications Inc. (NASDAQ:DISCA).

How are hedge funds trading Discovery Communications Inc. (NASDAQ:DISCA)?

In preparation for this year, a total of 15 of the hedge funds we track were long in this stock, a change of 0% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially.

According to our comprehensive database, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Discovery Communications Inc. (NASDAQ:DISCA). GAMCO Investors has a $40 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is David Gallo of Valinor Management LLC, with a $25 million position; the fund has 1% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include David Harding’s Winton Capital Management, Murray Stahl’s Horizon Asset Management and Alexander Mitchell’s Scopus Asset Management.

Due to the fact that Discovery Communications Inc. (NASDAQ:DISCA) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into 2013. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management dumped the largest stake of the “upper crust” of funds we monitor, worth an estimated $6 million in stock.. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Discovery Communications Inc. (NASDAQ:DISCA)?

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the latest six-month time frame, Discovery Communications Inc. (NASDAQ:DISCA) has experienced 1 unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Discovery Communications Inc. (NASDAQ:DISCA). Some of these stocks are Viacom, Inc. (NASDAQ:VIAB), Time Warner Cable Inc (NYSE:TWC), and Virgin Media Inc. (NASDAQ:VMED).

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Viacom, Inc. (NASDAQ:VIAB) 49 0 0
Time Warner Cable Inc (NYSE:TWC) 37 0 7
Virgin Media Inc. (NASDAQ:VMED) 31 0 2
DISH Network Corp. (NASDAQ:DISH) 34 0 11
Liberty Global Inc. (NASDAQ:LBTYA) 44 0 0

With the results demonstrated by our strategies, retail investors must always watch hedge fund and insider trading sentiment, and Discovery Communications Inc. (NASDAQ:DISCA) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

Related tickers: Discovery Communications Inc. (NASDAQ:DISCA), Viacom, Inc. (NASDAQ:VIAB), Time Warner Cable Inc (NYSE:TWC), Virgin Media Inc. (NASDAQ:VMED)

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