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Were Hedge Funds Right About Dumping Sirius XM Holdings Inc (SIRI)?

Is Sirius XM Holdings Inc (NASDAQ:SIRI) the right investment to pursue these days? Money managers are selling. The number of bullish hedge fund bets were cut by 3 recently. Our calculations also showed that SIRI isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.

Frank Brosens Taconic Capital Investor Letter

We’re going to review the new hedge fund action regarding Sirius XM Holdings Inc (NASDAQ:SIRI).

How have hedgies been trading Sirius XM Holdings Inc (NASDAQ:SIRI)?

At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in SIRI a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

SIRI_mar2019

Among these funds, Berkshire Hathaway held the most valuable stake in Sirius XM Holdings Inc (NASDAQ:SIRI), which was worth $787.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $201 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and Balyasny Asset Management were also bullish on Sirius XM Holdings Inc (NASDAQ:SIRI), allocating a large percentage of their portfolios to this stock.

Since Sirius XM Holdings Inc (NASDAQ:SIRI) has faced declining sentiment from the smart money, we can see that there exists a select few funds who were dropping their entire stakes last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the largest position of all the hedgies tracked by Insider Monkey, totaling close to $11.3 million in call options. Seth Wunder’s fund, Black-and-White Capital, also said goodbye to its call options, about $9.5 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Sirius XM Holdings Inc (NASDAQ:SIRI). These stocks are Pinduoduo Inc. (NASDAQ:PDD), Thomson Reuters Corporation (NYSE:TRI), PPG Industries, Inc. (NYSE:PPG), and Amphenol Corporation (NYSE:APH). This group of stocks’ market valuations are similar to SIRI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PDD 20 180528 -1
TRI 19 191623 -5
PPG 19 820414 -3
APH 21 478702 -4
Average 19.75 417817 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $1145 million in SIRI’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Thomson Reuters Corporation (NYSE:TRI) is the least popular one with only 19 bullish hedge fund positions. Sirius XM Holdings Inc (NASDAQ:SIRI) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately SIRI wasn’t in this group. Hedge funds that bet on SIRI were disappointed as the stock returned 8.3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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