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How Did Intelsat S.A. (I) Compare Against Hedge Fund Darlings in 2019?

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Intelsat S.A. (NYSE:I).

Intelsat S.A. (NYSE:I) was in 48 hedge funds’ portfolios at the end of the third quarter of 2019. I investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 42 hedge funds in our database with I positions at the end of the previous quarter. Our calculations also showed that I 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.

Discovery Capital Management

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 we’re going to go over the recent hedge fund action surrounding Intelsat S.A. (NYSE:I).

How have hedgies been trading Intelsat S.A. (NYSE:I)?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in I over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is I A Good Stock To Buy?

More specifically, Silver Lake Partners was the largest shareholder of Intelsat S.A. (NYSE:I), with a stake worth $224 million reported as of the end of September. Trailing Silver Lake Partners was Discovery Capital Management, which amassed a stake valued at $145.9 million. Pentwater Capital Management, Key Square Capital Management, and Point State Capital 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 Discovery Capital Management allocated the biggest weight to Intelsat S.A. (NYSE:I), around 24.42% of its 13F portfolio. Farmstead Capital Management is also relatively very bullish on the stock, earmarking 24.01 percent of its 13F equity portfolio to I.

As industrywide interest jumped, key money managers have been driving this bullishness. Discovery Capital Management, managed by Rob Citrone, created the largest position in Intelsat S.A. (NYSE:I). Discovery Capital Management had $86.8 million invested in the company at the end of the quarter. David Greenspan’s Slate Path Capital also initiated a $25.1 million position during the quarter. The following funds were also among the new I investors: Kevin D. Eng’s Columbus Hill Capital Management, Stuart J. Zimmer’s Zimmer Partners, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s check out hedge fund activity in other stocks similar to Intelsat S.A. (NYSE:I). These stocks are Avista Corp (NYSE:AVA), BankUnited (NYSE:BKU), Nektar Therapeutics (NASDAQ:NKTR), and Evercore Partners Inc. (NYSE:EVR). All of these stocks’ market caps match I’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVA 15 137623 4
BKU 21 420103 2
NKTR 17 154689 -2
EVR 29 339572 3
Average 20.5 262997 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $1064 million in I’s case. Evercore Partners Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Intelsat S.A. (NYSE:I) is more popular among hedge funds. 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 I wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on I were disappointed as the stock returned -68.2% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
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.

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