Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Live Nation Entertainment, Inc. (NYSE:LYV).
Is LYV stock a buy or sell? Live Nation Entertainment, Inc. (NYSE:LYV) has seen a decrease in hedge fund sentiment lately. Live Nation Entertainment, Inc. (NYSE:LYV) was in 46 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 50. Our calculations also showed that LYV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Charles Akre of Akre Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article).Keeping this in mind we’re going to go over the recent hedge fund action regarding Live Nation Entertainment, Inc. (NYSE:LYV).
Do Hedge Funds Think LYV Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in LYV over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Live Nation Entertainment, Inc. (NYSE:LYV), which was worth $401.9 million at the end of the fourth quarter. On the second spot was Select Equity Group which amassed $378.9 million worth of shares. Melvin Capital Management, Coatue Management, and D1 Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Emerson Point Capital allocated the biggest weight to Live Nation Entertainment, Inc. (NYSE:LYV), around 8.71% of its 13F portfolio. Columbus Point is also relatively very bullish on the stock, setting aside 6.56 percent of its 13F equity portfolio to LYV.
Because Live Nation Entertainment, Inc. (NYSE:LYV) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds who sold off their entire stakes last quarter. Intriguingly, Robert Boucai’s Newbrook Capital Advisors cut the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $43.7 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund sold off about $39.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Live Nation Entertainment, Inc. (NYSE:LYV). These stocks are The AES Corporation (NYSE:AES), KB Financial Group, Inc. (NYSE:KB), Lyft, Inc. (NASDAQ:LYFT), MGM Resorts International (NYSE:MGM), Darden Restaurants, Inc. (NYSE:DRI), Regions Financial Corporation (NYSE:RF), and Essex Property Trust Inc (NYSE:ESS). All of these stocks’ market caps are similar to LYV’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AES,38,900730,6 KB,5,42629,-1 LYFT,52,1166503,20 MGM,44,2171039,3 DRI,42,1410846,1 RF,26,203027,3 ESS,25,309571,-3 Average,33.1,886335,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $886 million. That figure was $1630 million in LYV’s case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 5 bullish hedge fund positions. Live Nation Entertainment, Inc. (NYSE:LYV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LYV is 72.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LYV as the stock returned 15.2% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.