Were Hedge Funds Right About Souring On Liberty Broadband Corp (LBRDK)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, 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 you are going to find out whether hedge funds thoughtLiberty Broadband Corp (NASDAQ:LBRDK) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Liberty Broadband Corp (NASDAQ:LBRDK) was in 45 hedge funds’ portfolios at the end of the first quarter of 2020. LBRDK has seen a decrease in hedge fund interest of late. There were 46 hedge funds in our database with LBRDK holdings at the end of the previous quarter. Our calculations also showed that LBRDK 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.


Philippe Laffont of Coatue Management

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. Now we’re going to take a peek at the latest hedge fund action regarding Liberty Broadband Corp (NASDAQ:LBRDK).

What does smart money think about Liberty Broadband Corp (NASDAQ:LBRDK)?

At the end of the first quarter, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the fourth quarter of 2019. By comparison, 39 hedge funds held shares or bullish call options in LBRDK a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in Liberty Broadband Corp (NASDAQ:LBRDK) was held by Eagle Capital Management, which reported holding $686 million worth of stock at the end of September. It was followed by Soros Fund Management with a $584.8 million position. Other investors bullish on the company included Coatue Management, Stockbridge Partners, and Cat Rock Capital. In terms of the portfolio weights assigned to each position Soros Fund Management allocated the biggest weight to Liberty Broadband Corp (NASDAQ:LBRDK), around 29.61% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, setting aside 21.8 percent of its 13F equity portfolio to LBRDK.

Seeing as Liberty Broadband Corp (NASDAQ:LBRDK) has experienced declining sentiment from hedge fund managers, it’s easy to see that there is a sect of funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Francis Cueto’s Asturias Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, worth an estimated $12.8 million in stock, and Chris Yetter’s Dumont Global was right behind this move, as the fund cut about $12 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Liberty Broadband Corp (NASDAQ:LBRDK) but similarly valued. These stocks are ING Groep N.V. (NYSE:ING), Splunk Inc (NASDAQ:SPLK), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), and ANSYS, Inc. (NASDAQ:ANSS). This group of stocks’ market values are similar to LBRDK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ING 13 298860 -1
SPLK 37 340300 -1
ALXN 56 3058097 8
ANSS 31 1059903 -2
Average 34.25 1189290 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $1189 million. That figure was $3334 million in LBRDK’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 13 bullish hedge fund positions. Liberty Broadband Corp (NASDAQ:LBRDK) 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately LBRDK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LBRDK were disappointed as the stock returned 12% 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.