Were Hedge Funds Right About TiVo Corporation (TIVO)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article, we look at what those funds think of TiVo Corporation (NASDAQ:TIVO) based on 4+ years of hedge fund holdings data.

TiVo Corporation (NASDAQ:TIVO) was in 26 hedge funds’ portfolios at the end of December. TIVO has experienced an increase in hedge fund sentiment in recent months. There were 23 hedge funds in our database with TIVO holdings at the end of the previous quarter. Our calculations also showed that TIVO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 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 41 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.

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing TiVo Corporation (NASDAQ:TIVO).

What have hedge funds been doing with TiVo Corporation (NASDAQ:TIVO)?

At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TIVO over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TIVO A Good Stock To Buy?

The largest stake in TiVo Corporation (NASDAQ:TIVO) was held by Engaged Capital, which reported holding $21.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.4 million position. Other investors bullish on the company included Clearline Capital, Lynrock Lake, and Winton Capital Management. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to TiVo Corporation (NASDAQ:TIVO), around 6.56% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, dishing out 4.86 percent of its 13F equity portfolio to TIVO.

With a general bullishness amongst the heavyweights, some big names have jumped into TiVo Corporation (NASDAQ:TIVO) headfirst. Winton Capital Management, managed by David Harding, assembled the most valuable position in TiVo Corporation (NASDAQ:TIVO). Winton Capital Management had $5.7 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $5.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Orrico’s Water Island Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s go over hedge fund activity in other stocks similar to TiVo Corporation (NASDAQ:TIVO). We will take a look at QEP Resources Inc (NYSE:QEP), Cornerstone Building Brands, Inc. (NYSE:CNR), Celestica Inc. (NYSE:CLS), and Tenneco Inc (NYSE:TEN). This group of stocks’ market caps are closest to TIVO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QEP 23 194024 2
CNR 26 114336 8
CLS 13 97259 0
TEN 21 143149 8
Average 20.75 137192 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $103 million in TIVO’s case. Cornerstone Building Brands, Inc. (NYSE:CNR) is the most popular stock in this table. On the other hand Celestica Inc. (NYSE:CLS) is the least popular one with only 13 bullish hedge fund positions. TiVo Corporation (NASDAQ:TIVO) 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately TIVO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TIVO were disappointed as the stock returned -21.2% 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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