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

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Live Nation Entertainment, Inc. (NYSE:LYV) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Live Nation Entertainment, Inc. (NYSE:LYV) a buy, sell, or hold? Investors who are in the know were becoming more confident. The number of long hedge fund positions inched up by 2 lately. Our calculations also showed that LYV 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler of Eminence 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. Keeping this in mind let’s review the new hedge fund action surrounding Live Nation Entertainment, Inc. (NYSE:LYV).

Hedge fund activity in Live Nation Entertainment, Inc. (NYSE:LYV)

At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LYV over the last 18 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is LYV A Good Stock To Buy?

The largest stake in Live Nation Entertainment, Inc. (NYSE:LYV) was held by Select Equity Group, which reported holding $379.6 million worth of stock at the end of September. It was followed by Akre Capital Management with a $249.2 million position. Other investors bullish on the company included D1 Capital Partners, Lone Pine Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Live Nation Entertainment, Inc. (NYSE:LYV), around 13.05% of its 13F portfolio. Deep Field Asset Management is also relatively very bullish on the stock, designating 12.54 percent of its 13F equity portfolio to LYV.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Akre Capital Management, managed by Charles Akre, assembled the biggest position in Live Nation Entertainment, Inc. (NYSE:LYV). Akre Capital Management had $249.2 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also initiated a $159.4 million position during the quarter. The other funds with new positions in the stock are Lone Pine Capital, Robert Pohly’s Samlyn Capital, and Ricky Sandler’s Eminence Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Live Nation Entertainment, Inc. (NYSE:LYV) but similarly valued. These stocks are Korea Electric Power Corporation (NYSE:KEP), Magna International Inc. (NYSE:MGA), Booz Allen Hamilton Holding Corporation (NYSE:BAH), and Masco Corporation (NYSE:MAS). This group of stocks’ market valuations resemble LYV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEP 7 30022 4
MGA 22 412543 -1
BAH 27 276427 -7
MAS 34 489853 -11
Average 22.5 302211 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $1627 million in LYV’s case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Live Nation Entertainment, Inc. (NYSE:LYV) 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately LYV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LYV were disappointed as the stock returned -2.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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