Did Hedge Funds Drop The Ball On Liberty Tripadvisor Holdings Inc (LTRPA) ?

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 Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) and determine whether hedge funds had an edge regarding this stock.

Is Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) ready to rally soon? Prominent investors were taking a bearish view. The number of bullish hedge fund positions dropped by 2 in recent months. Our calculations also showed that LTRPA 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). LTRPA was in 21 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with LTRPA positions at the end of the previous quarter.

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.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA).

What does smart money think about Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in LTRPA a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is LTRPA A Good Stock To Buy?

Among these funds, Eagle Capital Management held the most valuable stake in Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), which was worth $9.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $5.5 million worth of shares. Cove Street Capital, Renaissance Technologies, and Hudson Bay Capital Management 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 Cove Street Capital allocated the biggest weight to Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), around 0.88% of its 13F portfolio. Isomer Partners is also relatively very bullish on the stock, setting aside 0.64 percent of its 13F equity portfolio to LTRPA.

Due to the fact that Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there is a sect of hedgies that decided to sell off their entire stakes last quarter. Interestingly, David Costen Haley’s HBK Investments dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $16 million in stock, and Mark Cohen’s Stone House Capital was right behind this move, as the fund cut about $5.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA). We will take a look at Tyme Technologies, Inc. (NASDAQ:TYME), Lumber Liquidators Holdings Inc (NYSE:LL), Americas Gold and Silver Corporation (NYSE:USAS), and Protara Therapeutics, Inc. (NASDAQ:TARA). This group of stocks’ market caps are similar to LTRPA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TYME 4 2659 1
LL 11 13695 -2
USAS 8 4402 3
TARA 10 79858 4
Average 8.25 25154 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $38 million in LTRPA’s case. Lumber Liquidators Holdings Inc (NYSE:LL) is the most popular stock in this table. On the other hand Tyme Technologies, Inc. (NASDAQ:TYME) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on LTRPA as the stock returned 41.7% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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