Hedge Funds Are Hoarding Shares of These 5 Mid-caps

Mid-cap stocks offer the best of both worlds to investors. When investing for the long-term, their upside potential is better than that of large-cap stocks, whereas the risk associated with investing in them is usually much less than their small-cap counterparts. Since the mid-cap universe consists of a large number of stocks, selecting the best stocks within it is a challenging job for retail investors. To make that easier, we at Insider Monkey regularly scan the portfolios of the more than 800 hedge funds and prominent investors in our database to identify the stocks that are the most popular among them. In this article, we will take a look at the five mid-cap companies in which the investors in our database owned the highest concentration of shares collectively as of December 31.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012.(see the details here).

#5 Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT)

 – Investors with Long Positions (as of December 31): 52

 – Aggregate Value of Investors’ Holdings (as of December 31): $3.25 billion

 – Percentage of Common Stock Owned by Investors (as of December 31): 27.80%

During the fourth quarter, the number of long positions in Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) among the funds that we track increased by five, however, the aggregate value of their holdings of the stock saw a decline of $355 million. Even after reducing its stake in the company by 26% to 11.6 million shares, billionaire John Paulson‘s Paulson & Co remained the largest shareholder of the company among the funds in our database. On March 14, shares of the company surged by nearly 8% after Marriott International Inc (NASDAQ:MAR) reaffirmed its commitment to acquire it. This reaffirmation came after Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) notified Marriott International on March 11 that it had received an unsolicited indication of interest for acquisition by a consortium of investors led by Anbang Insurance Group.

#4 Liberty Interactive Group (NASDAQ:QVCA)

 – Investors with Long Positions (as of December 31): 71

 – Aggregate Value of Investors’ Holdings (as of December 31): $4.88 billion

 – Percentage of Common Stock Owned by Investors (as of December 31): 28%

The number of investors in our system with long positions in Liberty Interactive Group (NASDAQ:QVCA) increased by four and the aggregate value of their holdings in the company rose by $664 million during the fourth quarter. Billionaire Barry Rosenstein‘s JANA Partners was among the hedge funds that initiated a stake in the company during that period, purchasing 8.08 million shares. Though the broader market has recovered from the decline it saw at the beginning of the year, shares of Liberty Interactive Group (NASDAQ:QVCA) are still trading down by over 7% year-to-date. Analysts at FBR & Co. recently issued their earnings estimate for the company for the first quarter. They expect Liberty Interactive to report EPS of $0.19 for the quarter, much lower than the consensus estimate of $0.22. Furthermore, the analysts lowered their price target on the stock to $31 from $38 on March 9, while keeping their rating on it unchanged at ‘Outperform’.