Is Discovery Communications Inc. (NASDAQ:DISCA) a buy here? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience
If you’d ask most investors, hedge funds are viewed as underperforming, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, we look at the leaders of this club, around 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total asset base, and by tracking their best equity investments, we have unearthed a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as beneficial, positive insider trading activity is another way to parse down the financial markets. As the old adage goes: there are a number of incentives for a bullish insider to drop shares of his or her company, but just one, very simple reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this strategy if investors understand what to do (learn more here).
Now, we’re going to take a look at the recent action regarding Discovery Communications Inc. (NASDAQ:DISCA).
What does the smart money think about Discovery Communications Inc. (NASDAQ:DISCA)?
In preparation for this year, a total of 15 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly.
Of the funds we track, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Discovery Communications Inc. (NASDAQ:DISCA). GAMCO Investors has a $40 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Valinor Management LLC, managed by David Gallo, which held a $25 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include David Harding’s Winton Capital Management, Murray Stahl’s Horizon Asset Management and Alexander Mitchell’s Scopus Asset Management.
Seeing as Discovery Communications Inc. (NASDAQ:DISCA) has witnessed a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the largest position of all the hedgies we monitor, worth an estimated $6 million in stock.. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Discovery Communications Inc. (NASDAQ:DISCA)?
Insider purchases made by high-level executives is best served when the company in focus has experienced transactions within the past half-year. Over the latest six-month time period, Discovery Communications Inc. (NASDAQ:DISCA) has experienced 1 unique insiders buying, and 5 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Discovery Communications Inc. (NASDAQ:DISCA). These stocks are Viacom, Inc. (NASDAQ:VIAB), Time Warner Cable Inc (NYSE:TWC), Virgin Media Inc. (NASDAQ:VMED), DISH Network Corp. (NASDAQ:DISH), and Liberty Global Inc. (NASDAQ:LBTYA). This group of stocks belong to the catv systems industry and their market caps match DISCA’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Viacom, Inc. (NASDAQ:VIAB)||49||0||0|
|Time Warner Cable Inc (NYSE:TWC)||37||0||7|
|Virgin Media Inc. (NASDAQ:VMED)||31||0||2|
|DISH Network Corp. (NASDAQ:DISH)||34||0||11|
|Liberty Global Inc. (NASDAQ:LBTYA)||44||0||0|
With the results exhibited by Insider Monkey’s studies, retail investors should always watch hedge fund and insider trading sentiment, and Discovery Communications Inc. (NASDAQ:DISCA) is an important part of this process.