Qurate Retail, Inc. (QRTEA) Fell Out Of Favor With Hedge Funds

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Qurate Retail, Inc. (NASDAQ:QRTEA) changed recently.

Qurate Retail, Inc. (NASDAQ:QRTEA) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Qurate Retail, Inc. (NASDAQ:QRTEA) was in 31 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. There were 36 hedge funds in our database with QRTEA holdings at the end of December. Our calculations also showed that QRTEA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.

Andrew Raab FPR Partners Andy Raab

Andrew Raab of FPR Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to review the key hedge fund action surrounding Qurate Retail, Inc. (NASDAQ:QRTEA).

Do Hedge Funds Think QRTEA Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in QRTEA over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the biggest position in Qurate Retail, Inc. (NASDAQ:QRTEA), worth close to $162.8 million, amounting to 1.9% of its total 13F portfolio. The second largest stake is held by FPR Partners, managed by Bob Peck and Andy Raab, which holds a $144.6 million position; the fund has 4% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Stephen Mildenhall’s Contrarius Investment Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position General Equity Partners allocated the biggest weight to Qurate Retail, Inc. (NASDAQ:QRTEA), around 11.45% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, dishing out 10.01 percent of its 13F equity portfolio to QRTEA.

Seeing as Qurate Retail, Inc. (NASDAQ:QRTEA) has witnessed falling interest from the smart money, it’s safe to say that there were a few funds who sold off their entire stakes by the end of the first quarter. Intriguingly, Steven Tananbaum’s GoldenTree Asset Management cut the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $14.4 million in stock, and Michael Burry’s Scion Asset Management was right behind this move, as the fund dumped about $7.7 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Qurate Retail, Inc. (NASDAQ:QRTEA). We will take a look at Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), Inovalon Holdings Inc (NASDAQ:INOV), Highwoods Properties Inc (NYSE:HIW), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), PacWest Bancorp (NASDAQ:PACW), Radian Group Inc (NYSE:RDN), and ACI Worldwide Inc (NASDAQ:ACIW). All of these stocks’ market caps resemble QRTEA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOMB 6 48515 -6
INOV 17 108170 -5
HIW 20 117413 -1
OCDX 23 328347 23
PACW 31 599517 1
RDN 30 436078 -7
ACIW 23 686814 -7
Average 21.4 332122 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $776 million in QRTEA’s case. PacWest Bancorp (NASDAQ:PACW) is the most popular stock in this table. On the other hand Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) is the least popular one with only 6 bullish hedge fund positions. Qurate Retail, Inc. (NASDAQ:QRTEA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QRTEA is 71.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately QRTEA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on QRTEA were disappointed as the stock returned 9.6% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.