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Did Hedge Funds Make The Right Call On Liberty Global plc (LBTYA) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Liberty Global plc (NASDAQ:LBTYA) and determine whether hedge funds skillfully traded this stock.

Liberty Global plc (NASDAQ:LBTYA) investors should be aware of an increase in hedge fund interest in recent months. LBTYA was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with LBTYA holdings at the end of the previous quarter. Our calculations also showed that LBTYA 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

Seth Klarman of Baupost Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 we are checking out this tiny lithium stock. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding Liberty Global plc (NASDAQ:LBTYA).

How have hedgies been trading Liberty Global plc (NASDAQ:LBTYA)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in LBTYA a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in Liberty Global plc (NASDAQ:LBTYA). Berkshire Hathaway has a $318.8 million position in the stock, comprising 0.2% of its 13F portfolio. On Berkshire Hathaway’s heels is William Duhamel of Route One Investment Company, with a $139.6 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Seth Klarman’s Baupost Group, Antoine Firmenich and Richard Vogel’s Alatus Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Alatus Capital allocated the biggest weight to Liberty Global plc (NASDAQ:LBTYA), around 46.75% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, setting aside 4.58 percent of its 13F equity portfolio to LBTYA.

As aggregate interest increased, specific money managers have jumped into Liberty Global plc (NASDAQ:LBTYA) headfirst. Engineers Gate Manager, managed by Greg Eisner, assembled the biggest position in Liberty Global plc (NASDAQ:LBTYA). Engineers Gate Manager had $2.4 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Jinghua Yan’s TwinBeech Capital, Steve Cohen’s Point72 Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Liberty Global plc (NASDAQ:LBTYA) but similarly valued. These stocks are Insulet Corporation (NASDAQ:PODD), Occidental Petroleum Corporation (NYSE:OXY), Pembina Pipeline Corp (NYSE:PBA), and Icahn Enterprises LP (NASDAQ:IEP). This group of stocks’ market caps match LBTYA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PODD 36 648302 2
OXY 35 1384528 -9
PBA 15 52363 -2
IEP 3 9602364 -1
Average 22.25 2921889 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $2922 million. That figure was $813 million in LBTYA’s case. Insulet Corporation (NASDAQ:PODD) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 3 bullish hedge fund positions. Liberty Global plc (NASDAQ:LBTYA) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on LBTYA as the stock returned 32.4% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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