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 Live Nation Entertainment, Inc. (NYSE:LYV) and determine whether hedge funds had an edge regarding this stock.
Live Nation Entertainment, Inc. (NYSE:LYV) shareholders have witnessed a decrease in hedge fund interest recently. Live Nation Entertainment, Inc. (NYSE:LYV) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistics is 46. Our calculations also showed that LYV 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.
In today’s marketplace there are a large number of indicators stock traders employ to evaluate publicly traded companies. Some of the less known indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outpace the market by a solid amount (see the details here).
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. 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 junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to take a peek at the recent hedge fund action encompassing Live Nation Entertainment, Inc. (NYSE:LYV).
How have hedgies been trading Live Nation Entertainment, Inc. (NYSE:LYV)?
Heading into the third quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. By comparison, 39 hedge funds held shares or bullish call options in LYV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, D1 Capital Partners, managed by Daniel Sundheim, holds the most valuable position in Live Nation Entertainment, Inc. (NYSE:LYV). D1 Capital Partners has a $250.9 million position in the stock, comprising 1.9% of its 13F portfolio. The second largest stake is held by Akre Capital Management, led by Charles Akre, holding a $247.7 million position; 1.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Robert Joseph Caruso’s Select Equity Group, Jeffrey Tannenbaum’s Fir Tree and Philippe Laffont’s Coatue Management. In terms of the portfolio weights assigned to each position Fir Tree allocated the biggest weight to Live Nation Entertainment, Inc. (NYSE:LYV), around 6.07% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, dishing out 4.94 percent of its 13F equity portfolio to LYV.
Since Live Nation Entertainment, Inc. (NYSE:LYV) has witnessed bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their full holdings in the second quarter. It’s worth mentioning that Lone Pine Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising an estimated $138.5 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $108.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Live Nation Entertainment, Inc. (NYSE:LYV) but similarly valued. These stocks are Avery Dennison Corporation (NYSE:AVY), Packaging Corporation Of America (NYSE:PKG), Eastman Chemical Company (NYSE:EMN), Raymond James Financial, Inc. (NYSE:RJF), Allegion plc (NYSE:ALLE), Quidel Corporation (NASDAQ:QDEL), and CenterPoint Energy, Inc. (NYSE:CNP). All of these stocks’ market caps resemble LYV’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $1194 million in LYV’s case. Raymond James Financial, Inc. (NYSE:RJF) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Live Nation Entertainment, Inc. (NYSE:LYV) is more popular among hedge funds. Our overall hedge fund sentiment score for LYV is 81.7. 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. 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on LYV as the stock returned 28.1% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.