Did Hedge Funds Make The Right Call On Echostar Corporation (SATS) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtEchostar Corporation (NASDAQ:SATS) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Echostar Corporation (NASDAQ:SATS) a splendid stock to buy now? Hedge funds were becoming less hopeful. The number of long hedge fund bets retreated by 2 recently. Our calculations also showed that SATS 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). SATS was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with SATS holdings 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to check out the key hedge fund action surrounding Echostar Corporation (NASDAQ:SATS).

How have hedgies been trading Echostar Corporation (NASDAQ:SATS)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SATS over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is SATS A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Echostar Corporation (NASDAQ:SATS), which was worth $118.4 million at the end of the third quarter. On the second spot was Hound Partners which amassed $106.1 million worth of shares. Mangrove Partners, Park West Asset Management, and Arrowstreet Capital 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 Red Cedar Management allocated the biggest weight to Echostar Corporation (NASDAQ:SATS), around 13.38% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, dishing out 9.9 percent of its 13F equity portfolio to SATS.

Because Echostar Corporation (NASDAQ:SATS) has experienced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that decided to sell off their entire stakes by the end of the first quarter. It’s worth mentioning that David Einhorn’s Greenlight Capital cut the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $29.3 million in stock, and Jeffrey Tannenbaum’s Fir Tree was right behind this move, as the fund cut about $28.7 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Echostar Corporation (NASDAQ:SATS). We will take a look at Manpowergroup Inc (NYSE:MAN), Popular Inc (NASDAQ:BPOP), Global Blood Therapeutics Inc (NASDAQ:GBT), and Hexcel Corporation (NYSE:HXL). This group of stocks’ market values match SATS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAN 23 244244 -4
BPOP 28 468895 -5
GBT 23 431206 0
HXL 27 187145 -3
Average 25.25 332873 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $429 million in SATS’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand Manpowergroup Inc (NYSE:MAN) is the least popular one with only 23 bullish hedge fund positions. Echostar Corporation (NASDAQ:SATS) 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. 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 and surpassed the market by 15.5 percentage points. Unfortunately SATS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SATS investors were disappointed as the stock returned -12.5% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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