Were Hedge Funds Right About Selling Comcast Corporation (CMCSA)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Comcast Corporation (NASDAQ:CMCSA) and determine whether the smart money was really smart about this stock.

Comcast Corporation (NASDAQ:CMCSA) was in 83 hedge funds’ portfolios at the end of March. CMCSA has seen a decrease in activity from the world’s largest hedge funds lately. There were 87 hedge funds in our database with CMCSA positions at the end of the previous quarter. Our calculations also showed that CMCSA 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Boykin Curry of Eagle Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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. Now let’s check out the new hedge fund action regarding Comcast Corporation (NASDAQ:CMCSA).

How are hedge funds trading Comcast Corporation (NASDAQ:CMCSA)?

At Q1’s end, a total of 83 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CMCSA over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Comcast Corporation (NASDAQ:CMCSA) was held by Eagle Capital Management, which reported holding $1510.2 million worth of stock at the end of September. It was followed by Viking Global with a $615.5 million position. Other investors bullish on the company included First Pacific Advisors LLC, Orbis Investment Management, and SRS Investment Management. In terms of the portfolio weights assigned to each position 3G Sahana Capital Management allocated the biggest weight to Comcast Corporation (NASDAQ:CMCSA), around 31.37% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, dishing out 20.53 percent of its 13F equity portfolio to CMCSA.

Judging by the fact that Comcast Corporation (NASDAQ:CMCSA) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds that slashed their positions entirely heading into Q4. At the top of the heap, Tim Hurd and Ed Magnus’s BlueSpruce Investments sold off the largest position of all the hedgies tracked by Insider Monkey, comprising close to $318.7 million in stock, and Jorge Paulo Lemann’s 3G Capital was right behind this move, as the fund said goodbye to about $184.1 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Comcast Corporation (NASDAQ:CMCSA) but similarly valued. We will take a look at China Mobile Limited (NYSE:CHL), Adobe Inc. (NASDAQ:ADBE), Oracle Corporation (NYSE:ORCL), and Novo Nordisk A/S (NYSE:NVO). All of these stocks’ market caps match CMCSA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHL 11 449753 -1
ADBE 115 8180671 9
ORCL 48 2437677 -11
NVO 24 3036975 1
Average 49.5 3526269 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.5 hedge funds with bullish positions and the average amount invested in these stocks was $3526 million. That figure was $5539 million in CMCSA’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 11 bullish hedge fund positions. Comcast Corporation (NASDAQ:CMCSA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately CMCSA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CMCSA were disappointed as the stock returned 12.2% during the same time period 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 many of these stocks already outperformed the market so far this year.

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