Hedge Fund Consensus Stocks vs. Liberty Global Plc (LBTYK) In 2019

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Liberty Global Plc (NASDAQ:LBTYK) and compare its performance against hedge funds’ favorite stocks.

Liberty Global Plc (NASDAQ:LBTYK) shareholders have witnessed an increase in enthusiasm from smart money lately. LBTYK was in 38 hedge funds’ portfolios at the end of the third quarter of 2019. There were 34 hedge funds in our database with LBTYK holdings at the end of the previous quarter. Our calculations also showed that LBTYK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Seth Klarman of Baupost Group

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a glance at the new hedge fund action encompassing Liberty Global Plc (NASDAQ:LBTYK).

How have hedgies been trading Liberty Global Plc (NASDAQ:LBTYK)?

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. By comparison, 41 hedge funds held shares or bullish call options in LBTYK a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Liberty Global Plc (NASDAQ:LBTYK) was held by Baupost Group, which reported holding $1045.8 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $967.4 million position. Other investors bullish on the company included Luxor Capital Group, Route One Investment Company, and Berkshire Hathaway. In terms of the portfolio weights assigned to each position Manor Road Capital Partners allocated the biggest weight to Liberty Global Plc (NASDAQ:LBTYK), around 12.63% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, dishing out 11.84 percent of its 13F equity portfolio to LBTYK.

As one would reasonably expect, key money managers have been driving this bullishness. Wexford Capital, managed by Charles Davidson and Joseph Jacobs, initiated the most outsized position in Liberty Global Plc (NASDAQ:LBTYK). Wexford Capital had $39.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $39 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Brett Huckelbridge’s Steel Canyon Capital, and Dan Sobol and Lisa Hess’s SkyTop Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Liberty Global Plc (NASDAQ:LBTYK). These stocks are Fidelity National Financial Inc (NYSE:FNF), Equity Lifestyle Properties, Inc. (NYSE:ELS), Vornado Realty Trust (NYSE:VNO), and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). This group of stocks’ market valuations are closest to LBTYK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNF 28 340609 -1
ELS 19 521910 1
VNO 32 724917 5
BMRN 45 1621801 0
Average 31 802309 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $802 million. That figure was $3405 million in LBTYK’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 19 bullish hedge fund positions. Liberty Global Plc (NASDAQ:LBTYK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately LBTYK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LBTYK were disappointed as the stock returned 5.4% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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