Lions Gate Entertainment Corp. (USA) (NYSE:LGF) shares have surged by 8% today after the entertainment company reported fourth quarter of fiscal year 2016 earnings of $0.07 per share on sales of $791.2 million, beating the consensus estimates by $0.09 and $50.53 million respectively. For the full 2016 fiscal year, the company reported sales of $2.35 billion, adjusted EBITDA of $162.3 million, and adjusted EPS of $0.86 per share. Although the company’s film releases weren’t as strong as previous years, the company’s slate for the 2016 calendar year is expected to be bigger and to generate more profit. The company’s backlog is also growing, with the film entertainment backlog rising by $0.2 billion quarter-over-quarter to $1.5 billion at the end of March.
We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity (see the details here). With this in mind, as the latest round of 13F filings has just ended, let’s examine the smart money sentiment towards Lions Gate Entertainment Corp. (USA) (NYSE:LGF).
Is Lions Gate Entertainment Corp. (USA) (NYSE:LGF) a marvelous investment now? Hedge funds are in an optimistic mood. The number of bullish hedge fund bets went up by 1 in the first quarter. LGF was in 32 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with LGF holdings at the end of the previous quarter. At the end of this article we will also compare LGF to other stocks including Telephone & Data Systems, Inc. (NYSE:TDS), Fitbit Inc (NYSE:FIT), and Kate Spade & Co (NYSE:KATE) to get a better sense of its popularity.
When looking at the institutional investors followed by Insider Monkey, MHR Fund Management, managed by Mark Rachesky, holds the largest position in Lions Gate Entertainment Corp. (USA) (NYSE:LGF). MHR Fund Management has a $660.1 million position in the stock, comprising 53.5% of its 13F portfolio. The second most bullish fund manager is David Goel and Paul Ferri of Matrix Capital Management, with a $60.9 million position; 3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Barry Rosenstein’s JANA Partners, Curtis Macnguyen’s Ivory Capital, and Ricky Sandler’s Eminence Capital.
On the next page we’ll look at some funds that took up positions in Lions Gate during Q1, as well as compare the stock to a handful of others with similar market caps.