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Were Hedge Funds Right About Betting On DISH Network Corp. (DISH)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards DISH Network Corp. (NASDAQ:DISH) and determine whether hedge funds skillfully traded this stock.

DISH Network Corp. (NASDAQ:DISH) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that DISH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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.

Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold 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 recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action regarding DISH Network Corp. (NASDAQ:DISH).

What have hedge funds been doing with DISH Network Corp. (NASDAQ:DISH)?

At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in DISH a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in DISH Network Corp. (NASDAQ:DISH) was held by King Street Capital, which reported holding $249.8 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $136 million position. Other investors bullish on the company included Paulson & Co, Key Square Capital Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position King Street Capital allocated the biggest weight to DISH Network Corp. (NASDAQ:DISH), around 27.89% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, designating 11.35 percent of its 13F equity portfolio to DISH.

Consequently, key hedge funds were breaking ground themselves. Cavalry Asset Management, managed by John Hurley, established the largest position in DISH Network Corp. (NASDAQ:DISH). Cavalry Asset Management had $15.9 million invested in the company at the end of the quarter. Jason Mudrick’s Mudrick Capital Management also made a $7 million investment in the stock during the quarter. The other funds with brand new DISH positions are Sander Gerber’s Hudson Bay Capital Management, Greg Eisner’s Engineers Gate Manager, and Nick Thakore’s Diametric Capital.

Let’s also examine hedge fund activity in other stocks similar to DISH Network Corp. (NASDAQ:DISH). We will take a look at POSCO (NYSE:PKX), Vipshop Holdings Limited (NYSE:VIPS), Burlington Stores Inc (NYSE:BURL), and Liberty Global plc (NASDAQ:LBTYA). This group of stocks’ market caps resemble DISH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PKX 11 40514 1
VIPS 30 553863 3
BURL 40 937584 4
LBTYA 30 812772 3
Average 27.75 586183 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $863 million in DISH’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks DISH Network Corp. (NASDAQ:DISH) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on DISH as the stock returned 72.6% in Q2 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.

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