Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of The Liberty SiriusXM Group (NASDAQ:LSXMK).
The Liberty SiriusXM Group (NASDAQ:LSXMK) shareholders have witnessed a decrease in hedge fund sentiment lately. LSXMK was in 42 hedge funds' portfolios at the end of June. There were 45 hedge funds in our database with LSXMK positions at the end of the previous quarter. Our calculations also showed that LSXMK isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to 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 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 40 percentage points since May 2014 through May 30, 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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a gander at the new hedge fund action surrounding The Liberty SiriusXM Group (NASDAQ:LSXMK).
What does smart money think about The Liberty SiriusXM Group (NASDAQ:LSXMK)?
Heading into the third quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LSXMK over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
[caption id="attachment_750220" align="aligncenter" width="473"] Andrew Raab of FPR Partners[/caption]
Among these funds, Berkshire Hathaway held the most valuable stake in The Liberty SiriusXM Group (NASDAQ:LSXMK), which was worth $1180.8 million at the end of the second quarter. On the second spot was FPR Partners which amassed $265.3 million worth of shares. Moreover, D E Shaw, Citadel Investment Group, and Dorsal Capital Management were also bullish on The Liberty SiriusXM Group (NASDAQ:LSXMK), allocating a large percentage of their portfolios to this stock.
Due to the fact that The Liberty SiriusXM Group (NASDAQ:LSXMK) has witnessed falling interest from hedge fund managers, it's easy to see that there is a sect of money managers who were dropping their positions entirely heading into Q3. It's worth mentioning that Steve Cohen's Point72 Asset Management cut the biggest investment of all the hedgies monitored by Insider Monkey, worth about $9.5 million in stock, and Glenn Russell Dubin's Highbridge Capital Management was right behind this move, as the fund sold off about $5.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The Liberty SiriusXM Group (NASDAQ:LSXMK) but similarly valued. These stocks are Viacom, Inc. (NASDAQ:VIAB), Textron Inc. (NYSE:TXT), The Liberty SiriusXM Group (NASDAQ:LSXMA), and InterContinental Hotels Group PLC (NYSE:IHG). All of these stocks' market caps match LSXMK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VIAB,41,1052795,3 TXT,23,617924,-1 LSXMA,34,1328002,-7 IHG,4,21692,-1 Average,25.5,755103,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $755 million. That figure was $2589 million in LSXMK's case. Viacom, Inc. (NASDAQ:VIAB) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks The Liberty SiriusXM Group (NASDAQ:LSXMK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LSXMK as the stock returned 10.5% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.