Were Hedge Funds Right About Embracing Live Nation Entertainment, Inc. (LYV)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Live Nation Entertainment, Inc. (NYSE:LYV).

Live Nation Entertainment, Inc. (NYSE:LYV) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistics is 46. LYV investors should pay attention to a decrease in enthusiasm from smart money recently. There were 46 hedge funds in our database with LYV positions at the end of the first quarter. Our calculations also showed that LYV 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).

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.

With all of this in mind let’s take a look at the fresh hedge fund action surrounding Live Nation Entertainment, Inc. (NYSE:LYV).

How are hedge funds trading Live Nation Entertainment, Inc. (NYSE:LYV)?

At the end of the second quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2020. By comparison, 39 hedge funds held shares or bullish call options in LYV a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Live Nation Entertainment, Inc. (NYSE:LYV) was held by D1 Capital Partners, which reported holding $250.9 million worth of stock at the end of September. It was followed by Akre Capital Management with a $247.7 million position. Other investors bullish on the company included Select Equity Group, Fir Tree, and Coatue Management. In terms of the portfolio weights assigned to each position Fir Tree allocated the biggest weight to Live Nation Entertainment, Inc. (NYSE:LYV), around 6.07% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, earmarking 4.94 percent of its 13F equity portfolio to LYV.

Since Live Nation Entertainment, Inc. (NYSE:LYV) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their positions entirely last quarter. It’s worth mentioning that Lone Pine Capital sold off the largest investment of all the hedgies monitored by Insider Monkey, totaling an estimated $138.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $108.7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Live Nation Entertainment, Inc. (NYSE:LYV). We will take a look at Avery Dennison Corporation (NYSE:AVY), Packaging Corporation Of America (NYSE:PKG), Eastman Chemical Company (NYSE:EMN), Raymond James Financial, Inc. (NYSE:RJF), Allegion plc (NYSE:ALLE), Quidel Corporation (NASDAQ:QDEL), and CenterPoint Energy, Inc. (NYSE:CNP). This group of stocks’ market values match LYV’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $1194 million in LYV’s case. Raymond James Financial, Inc. (NYSE:RJF) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Live Nation Entertainment, Inc. (NYSE:LYV) is more popular among hedge funds. Our overall hedge fund sentiment score for LYV is 81.7. 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. 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 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on LYV as the stock returned 28.9% since the end of June (through 10/23) 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.

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