How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Liberty Broadband Corp (NASDAQ:LBRDA) and determine whether hedge funds had an edge regarding this stock.
Liberty Broadband Corp (NASDAQ:LBRDA) has seen a decrease in activity from the world’s largest hedge funds lately. Liberty Broadband Corp (NASDAQ:LBRDA) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that LBRDA 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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 we’re going to go over the fresh hedge fund action regarding Liberty Broadband Corp (NASDAQ:LBRDA).
What have hedge funds been doing with Liberty Broadband Corp (NASDAQ:LBRDA)?
At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in LBRDA a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bob Peck and Andy Raab’s FPR Partners has the most valuable position in Liberty Broadband Corp (NASDAQ:LBRDA), worth close to $144 million, corresponding to 5% of its total 13F portfolio. Sitting at the No. 2 spot is Ashe Capital, managed by William Crowley, William Harker, and Stephen Blass, which holds a $125.6 million position; the fund has 9.6% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Boykin Curry’s Eagle Capital Management, Sander Gerber’s Hudson Bay Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Liberty Broadband Corp (NASDAQ:LBRDA), around 9.65% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, designating 6.6 percent of its 13F equity portfolio to LBRDA.
Because Liberty Broadband Corp (NASDAQ:LBRDA) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few money managers that slashed their full holdings by the end of the second quarter. Interestingly, Dennis Leibowitz’s Act II Capital dropped the largest position of all the hedgies followed by Insider Monkey, totaling close to $5 million in stock. Morris Mark’s fund, Mark Asset Management, also said goodbye to its stock, about $4.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Liberty Broadband Corp (NASDAQ:LBRDA) but similarly valued. These stocks are Liberty Broadband Corp (NASDAQ:LBRDK), Best Buy Co., Inc. (NYSE:BBY), State Street Corporation (NYSE:STT), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Fortinet Inc (NASDAQ:FTNT), Archer Daniels Midland Company (NYSE:ADM), and Palo Alto Networks Inc (NYSE:PANW). All of these stocks’ market caps resemble LBRDA’s market cap.
|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 42.1 hedge funds with bullish positions and the average amount invested in these stocks was $1874 million. That figure was $718 million in LBRDA’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Archer Daniels Midland Company (NYSE:ADM) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Liberty Broadband Corp (NASDAQ:LBRDA) is even less popular than ADM. Our overall hedge fund sentiment score for LBRDA is 13.8. 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. Hedge funds clearly dropped the ball on LBRDA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on LBRDA as the stock returned 16.1% during the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.