Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Loral Space & Communications Inc. (NASDAQ:LORL) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that lorl isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s take a glance at the recent hedge fund action surrounding Loral Space & Communications Inc. (NASDAQ:LORL).
How are hedge funds trading Loral Space & Communications Inc. (NASDAQ:LORL)?
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the fourth quarter of 2018. By comparison, 19 hedge funds held shares or bullish call options in LORL a year ago. So, let’s see 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, Mark Rachesky’s MHR Fund Management has the number one position in Loral Space & Communications Inc. (NASDAQ:LORL), worth close to $307.5 million, accounting for 21.6% of its total 13F portfolio. Sitting at the No. 2 spot is Highland Capital Management, managed by James Dondero, which holds a $74.5 million position; 4.6% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism contain Christopher Pucillo’s Solus Alternative Asset Management, Mario Gabelli’s GAMCO Investors and Leon Cooperman’s Omega Advisors.
Now, some big names have been driving this bullishness. OZ Management, managed by Daniel S. Och, initiated the largest position in Loral Space & Communications Inc. (NASDAQ:LORL). OZ Management had $12 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $0.8 million position during the quarter. The following funds were also among the new LORL investors: Matthew Hulsizer’s PEAK6 Capital Management, Ken Griffin’s Citadel Investment Group, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks similar to Loral Space & Communications Inc. (NASDAQ:LORL). These stocks are Herc Holdings Inc. (NYSE:HRI), Codexis, Inc. (NASDAQ:CDXS), Heritage Financial Corporation (NASDAQ:HFWA), and Hecla Mining Company (NYSE:HL). This group of stocks’ market valuations match LORL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $544 million in LORL’s case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 7 bullish hedge fund positions. Loral Space & Communications Inc. (NASDAQ:LORL) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately LORL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LORL were disappointed as the stock returned -4.7% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.