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Top Mid-Cap Stocks Smart Money Love: Cheniere Energy Inc. (LNG), Liberty Interactive Corporation (QVCA) & Others

It is believed that mid-cap companies should be a key component of a well-diversified portfolio. An investment in mid-cap stocks provides exposure to companies ranging in size between $1 and $10 billion in market capitalization, which offers handy diversification benefits. Generally, mid-cap companies receive less coverage by investment analysts than large- and mega-caps, which in turn allows experienced investors to find great investment opportunities. As the latest round of 13F filings has completed, we have analyzed the data from equity portfolios of over 700 large investors and identified the most popular mid-cap stock picks among them, which include: Cheniere Energy Inc. (NYSE:LNG), Liberty Interactive Corporation (NASDAQ:QVCA), Endo International plc (NASDAQ:ENDP), Molson Coors Brewing Company (NYSE:TAP), and Mohawk Industries Inc. (NYSE:MHK).

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Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short bets. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ equity portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 66 percentage points since the end of August 2012 (read the details here). This strategy also managed to beat the market by double digits annually in our backtests covering the 1999-2012 period.

The most popular mid-cap stock among the hedge funds we track is Cheniere Energy Inc. (NYSE:LNG), in which 76 investors within our database hold equity stakes as of the end of the second quarter, five less than a quarter earlier. Meanwhile, the value of their total holdings decreased to $9.00 billion from $9.75 billion. The company’s stock has lost nearly 3% since the beginning of the year, which is not so bad compared to its peers; the oil and gas pipeline industry lost 13.4% year-to-date. Cheniere Energy has recently posted its financial results for the second quarter of 2015, reporting a net loss of $118.5 million or $0.52 per share, compared to a net loss of $201.9 million or $0.90 delivered a year ago. From the massive pool of hedge funds that we track, Seth Klarman’s Baupost Group is among the largest shareholders of Cheniere Energy Inc. (NYSE:LNG), owning 15.37 million shares as of June 30.

Liberty Interactive Corporation (NASDAQ:QVCA) took the second spot on our list. The number of hedge funds owning stakes in the company reduced to 70 from 77, whereas the value of their total holdings declined to $4.04 billion from $4.85 billion. On August 5, the company released its financial results for the second quarter of 2015, posting a quarterly net income of $161 million, compared to $157 million reported a year ago. At the same time, the total revenue came at $1,998 million, which marked a decrease of 1% year-over-year. Peter Adam Hochfelder’s Brahman Capital is one of the funds within our database that is bullish on Liberty Interactive Corporation (NASDAQ:QVCA), owning 8.99 million shares at the end of June.

Let’s move on to Endo International plc (NASDAQ:ENDP), which is a specialty healthcare company that focuses on branded and generic pharmaceuticals and devices. The number of hedge funds’ long positions in the healthcare stock increased to 67 from 63 during the latest quarter, while the value of these positions increased to $4.46 billion from $4.18 billion. The stock gained 18% year-to-date despite embarking on a slow downward trend since the end of April. The company has reported revenues of $735 million for the second quarter, up by 24% year-over-year. Meanwhile, the company’s diluted loss per share from continuing operations came to $0.49, compared to diluted earnings per share of $0.25 reported a year ago. Daniel S. Och’s OZ Capital Management, one of the hedge funds that we track, owns 8.84 million shares in Endo International plc (NASDAQ:ENDP) as of June 30.

The number of hedge funds that hold equity stakes in Molson Coors Brewing Company (NYSE:TAP) increased to 65 from 62 over the quarter. At the same time, the overall value of the hedge fund’s investments in the company augmented by $48.50 million to $2.12 billion. The stock of the brewing company has lost nearly 4% since the beginning of the year. Molson Coors’ second-quarter worldwide sales dropped by over 15% and its adjusted net income came to $263.8 million or $1.41 per diluted share in the second quarter, down by 10% year-over-year. Nevertheless, the brewing company managed to beat the analysts’ earnings estimates of $1.32 per share. The London-based Kenneth Mario Garschina’s Mason Capital Management is among the most bullish investors on Molson Coors Brewing Company (NYSE:TAP) within our database, owning a 3.13 million shares, according to its latest 13F filing.

Our list is completed by Mohawk Industries Inc. (NYSE:MHK), a leading global flooring manufacturing company. During the last quarter, three hedge funds acquired new stakes in the company, so the number of funds with long positions increased to 59. Meanwhile, the value of all positions went up to $3.89 billion from $3.77 billion. Mohawk’s stock is currently trading close to its all-time high, gaining 33% year-to-date. The flooring manufacturer has delivered net earnings of $186 million, or diluted earnings per share of $2.53, for the second quarter, compared to $153 million or $2.08 per share reported a year ago, while its net sales remained flat year-over-year at $2.0 billion. Andreas Halvorsen’s Viking Global is one of the largest shareholders of Mohawk Industries Inc. (NYSE:MHK) with 4.31 million shares.

Disclosure: None

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