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Here is What Hedge Funds Think About Liberty Latin America Ltd. (LILAK)

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 Latin America Ltd. (NASDAQ:LILAK) and determine whether hedge funds skillfully traded this stock.

Liberty Latin America Ltd. (NASDAQ:LILAK) has experienced an increase in hedge fund interest recently. Liberty Latin America Ltd. (NASDAQ:LILAK) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistics is 62. There were 25 hedge funds in our database with LILAK holdings at the end of March. Our calculations also showed that LILAK isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 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 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.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s review the fresh hedge fund action regarding Liberty Latin America Ltd. (NASDAQ:LILAK).

What have hedge funds been doing with Liberty Latin America Ltd. (NASDAQ:LILAK)?

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LILAK over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Ashe Capital, managed by William Crowley, William Harker, and Stephen Blass, holds the biggest position in Liberty Latin America Ltd. (NASDAQ:LILAK). Ashe Capital has a $80.2 million position in the stock, comprising 6.2% of its 13F portfolio. On Ashe Capital’s heels is Fine Capital Partners, led by Debra Fine, holding a $39.1 million position; 19.2% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism comprise Ryan Pedlow’s Two Creeks Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Wallace Weitz’s Wallace R. Weitz & Co.. In terms of the portfolio weights assigned to each position Fine Capital Partners allocated the biggest weight to Liberty Latin America Ltd. (NASDAQ:LILAK), around 19.18% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, designating 6.16 percent of its 13F equity portfolio to LILAK.

Now, some big names have jumped into Liberty Latin America Ltd. (NASDAQ:LILAK) headfirst. Quaker Capital Investments, managed by Mark G. Schoeppner, created the most valuable position in Liberty Latin America Ltd. (NASDAQ:LILAK). Quaker Capital Investments had $5.2 million invested in the company at the end of the quarter. John Smith Clark’s Southpoint Capital Advisors also initiated a $4.7 million position during the quarter. The following funds were also among the new LILAK investors: Paul J. Isaac’s Arbiter Partners Capital Management, Donald Sussman’s Paloma Partners, and Hoon Kim’s Quantinno Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Liberty Latin America Ltd. (NASDAQ:LILAK) but similarly valued. These stocks are Fitbit Inc (NYSE:FIT), Moelis & Company (NYSE:MC), Insight Enterprises, Inc. (NASDAQ:NSIT), Hecla Mining Company (NYSE:HL), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Four Corners Property Trust, Inc. (NYSE:FCPT), and Paramount Group Inc (NYSE:PGRE). This group of stocks’ market caps match LILAK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FIT 30 350584 4
MC 8 48802 -2
NSIT 20 72128 7
HL 13 42245 -2
YMAB 13 148275 2
FCPT 19 69779 5
PGRE 21 97593 2
Average 17.7 118487 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $252 million in LILAK’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand Moelis & Company (NYSE:MC) is the least popular one with only 8 bullish hedge fund positions. Liberty Latin America Ltd. (NASDAQ:LILAK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LILAK is 63.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately LILAK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LILAK were disappointed as the stock returned -12.8% during the same time period 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 many of these stocks already outperformed the market so far this year.

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