The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Loral Space & Communications Inc (NASDAQ:LORL) and determine whether the smart money was really smart about this stock.
Hedge fund interest in Loral Space & Communications Inc (NASDAQ:LORL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LORL 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). At the end of this article we will also compare LORL to other stocks including National Energy Services Reunited Corp. (NASDAQ:NESR), Talos Energy, Inc. (NYSE:TALO), and Forrester Research, Inc. (NASDAQ:FORR) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Loral Space & Communications Inc (NASDAQ:LORL).
How have hedgies been trading Loral Space & Communications Inc (NASDAQ:LORL)?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in LORL a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, MHR Fund Management held the most valuable stake in Loral Space & Communications Inc (NASDAQ:LORL), which was worth $166.5 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $21.6 million worth of shares. OZ Management, Hudson Bay Capital Management, and Highland Capital Management 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 MHR Fund Management allocated the biggest weight to Loral Space & Communications Inc (NASDAQ:LORL), around 17.94% of its 13F portfolio. North Run Capital is also relatively very bullish on the stock, designating 5.15 percent of its 13F equity portfolio to LORL.
Judging by the fact that Loral Space & Communications Inc (NASDAQ:LORL) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedge funds that slashed their full holdings last quarter. Intriguingly, Greg Eisner’s Engineers Gate Manager sold off the largest position of the “upper crust” of funds followed by Insider Monkey, worth an estimated $0.2 million in stock. Michael M. Rothenberg’s fund, Moab Capital Partners, also dropped its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Loral Space & Communications Inc (NASDAQ:LORL) but similarly valued. We will take a look at National Energy Services Reunited Corp. (NASDAQ:NESR), Talos Energy, Inc. (NYSE:TALO), Forrester Research, Inc. (NASDAQ:FORR), Collegium Pharmaceutical Inc (NASDAQ:COLL), Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), Green Brick Partners Inc (NASDAQ:GRBK), and Dillard’s, Inc. (NYSE:DDS). This group of stocks’ market valuations are closest to 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 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $254 million in LORL’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Forrester Research, Inc. (NASDAQ:FORR) 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. Our overall hedge fund sentiment score for LORL is 70.7. 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. 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 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 beat the market by 19.3 percentage points. Unfortunately LORL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LORL were disappointed as the stock returned -6.3% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.