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Do Hedge Funds Like Liberty Latin America Ltd. (LILA) At All?

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 thoughtLiberty Latin America Ltd. (NASDAQ:LILA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Liberty Latin America Ltd. (NASDAQ:LILA) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. LILA was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with LILA positions at the end of the previous quarter. Our calculations also showed that LILA 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

hedge funds vs. mutual funds

Warren Buffett of Berkshire Hathaway

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Liberty Latin America Ltd. (NASDAQ:LILA).

Hedge fund activity in Liberty Latin America Ltd. (NASDAQ:LILA)

At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in LILA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Ashe Capital held the most valuable stake in Liberty Latin America Ltd. (NASDAQ:LILA), which was worth $48.6 million at the end of the third quarter. On the second spot was Berkshire Hathaway which amassed $27.7 million worth of shares. Bill & Melinda Gates Foundation Trust, Two Creeks Capital Management, and Renaissance Technologies 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 Ashe Capital allocated the biggest weight to Liberty Latin America Ltd. (NASDAQ:LILA), around 4.5% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, earmarking 0.3 percent of its 13F equity portfolio to LILA.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Liberty Latin America Ltd. (NASDAQ:LILA) headfirst. Millennium Management, managed by Israel Englander, initiated the most valuable position in Liberty Latin America Ltd. (NASDAQ:LILA). Millennium Management had $0.7 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to Liberty Latin America Ltd. (NASDAQ:LILA). These stocks are Lithia Motors Inc (NYSE:LAD), Kennedy-Wilson Holdings Inc (NYSE:KW), Acushnet Holdings Corp. (NYSE:GOLF), and Park Hotels & Resorts Inc. (NYSE:PK). This group of stocks’ market caps are similar to LILA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAD 27 388450 -2
KW 22 308206 5
GOLF 12 14131 -4
PK 26 162562 13
Average 21.75 218337 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $99 million in LILA’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Liberty Latin America Ltd. (NASDAQ:LILA) is even less popular than GOLF. Hedge funds dodged a bullet by taking a bearish stance towards LILA. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately LILA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); LILA investors were disappointed as the stock returned -7.6% 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 so far in 2020.

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