Did Hedge Funds Make The Right Call On Loral Space & Communications Inc (LORL) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Loral Space & Communications Inc (NASDAQ:LORL) based on that data and determine whether they were really smart about the stock.

Loral Space & Communications Inc (NASDAQ:LORL) was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. LORL has experienced an increase in activity from the world’s largest hedge funds lately. There were 18 hedge funds in our database with LORL positions at the end of the previous quarter. Our calculations also showed that LORL 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.

Mark Rachesky MHR

Mark Rachesky of MHR Fund Management

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. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Loral Space & Communications Inc (NASDAQ:LORL).

Hedge fund activity in Loral Space & Communications Inc (NASDAQ:LORL)

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in LORL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, MHR Fund Management was the largest shareholder of Loral Space & Communications Inc (NASDAQ:LORL), with a stake worth $138.6 million reported as of the end of September. Trailing MHR Fund Management was Highland Capital Management, which amassed a stake valued at $23.5 million. GAMCO Investors, OZ Management, and Solus Alternative Asset 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 Solus Alternative Asset Management allocated the biggest weight to Loral Space & Communications Inc (NASDAQ:LORL), around 29.94% of its 13F portfolio. MHR Fund Management is also relatively very bullish on the stock, designating 21.05 percent of its 13F equity portfolio to LORL.

As industrywide interest jumped, some big names have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Loral Space & Communications Inc (NASDAQ:LORL). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.2 million position during the quarter. The following funds were also among the new LORL investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Michael M. Rothenberg’s Moab Capital Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Loral Space & Communications Inc (NASDAQ:LORL) but similarly valued. These stocks are Preferred Bank (NASDAQ:PFBC), LeMaitre Vascular Inc (NASDAQ:LMAT), Camping World Holdings, Inc. (NYSE:CWH), and Live Oak Bancshares Inc (NASDAQ:LOB). All of these stocks’ market caps are closest to LORL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFBC 7 24634 -4
LMAT 6 4580 -3
CWH 16 67549 1
LOB 10 25016 0
Average 9.75 30445 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $224 million in LORL’s case. Camping World Holdings, Inc. (NYSE:CWH) is the most popular stock in this table. On the other hand LeMaitre Vascular Inc (NASDAQ:LMAT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Loral Space & Communications Inc (NASDAQ:LORL) 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 LORL as the stock returned 44.1% 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.