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Top Mid-Cap Stocks Smart Money Love: Cheniere Energy Inc. (LNG), Liberty Interactive Corporation (QVCA) & Others

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It is believed that mid-cap companies should be a key component of a well-diversified portfolio. An investment in mid-cap stocks provides exposure to companies ranging in size between $1 and $10 billion in market capitalization, which offers handy diversification benefits. Generally, mid-cap companies receive less coverage by investment analysts than large- and mega-caps, which in turn allows experienced investors to find great investment opportunities. As the latest round of 13F filings has completed, we have analyzed the data from equity portfolios of over 700 large investors and identified the most popular mid-cap stock picks among them, which include: Cheniere Energy Inc. (NYSE:LNG), Liberty Interactive Corporation (NASDAQ:QVCA), Endo International plc (NASDAQ:ENDP), Molson Coors Brewing Company (NYSE:TAP), and Mohawk Industries Inc. (NYSE:MHK).

arrow, up, rising

Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short bets. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ equity portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 66 percentage points since the end of August 2012 (read the details here). This strategy also managed to beat the market by double digits annually in our backtests covering the 1999-2012 period.

The most popular mid-cap stock among the hedge funds we track is Cheniere Energy Inc. (NYSE:LNG), in which 76 investors within our database hold equity stakes as of the end of the second quarter, five less than a quarter earlier. Meanwhile, the value of their total holdings decreased to $9.00 billion from $9.75 billion. The company’s stock has lost nearly 3% since the beginning of the year, which is not so bad compared to its peers; the oil and gas pipeline industry lost 13.4% year-to-date. Cheniere Energy has recently posted its financial results for the second quarter of 2015, reporting a net loss of $118.5 million or $0.52 per share, compared to a net loss of $201.9 million or $0.90 delivered a year ago. From the massive pool of hedge funds that we track, Seth Klarman’s Baupost Group is among the largest shareholders of Cheniere Energy Inc. (NYSE:LNG), owning 15.37 million shares as of June 30.

Liberty Interactive Corporation (NASDAQ:QVCA) took the second spot on our list. The number of hedge funds owning stakes in the company reduced to 70 from 77, whereas the value of their total holdings declined to $4.04 billion from $4.85 billion. On August 5, the company released its financial results for the second quarter of 2015, posting a quarterly net income of $161 million, compared to $157 million reported a year ago. At the same time, the total revenue came at $1,998 million, which marked a decrease of 1% year-over-year. Peter Adam Hochfelder’s Brahman Capital is one of the funds within our database that is bullish on Liberty Interactive Corporation (NASDAQ:QVCA), owning 8.99 million shares at the end of June.

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