Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proven over the years to have excellent stock picking skills (hence their assets under management continue to grow). We believe that hedge fund sentiment should be a critical tool in an individual investor’s stock selection process as it can provide great insight into what the brightest minds in the financial industry think about specific stocks. Ultimately, these people have access to the brightest analysts and expensive sources of data / information that individual investors cannot reach. So should one consider investing in Live Nation Entertainment, Inc. (NYSE: LYV)? The Smart Money Sentiment can provide an answer to this question.
Is Live Nation Entertainment, Inc. (NYSE: LYV) buy, sell or hold? The best stock pickers were pessimistic. The number of long hedge fund positions has decreased by 9 in the past few months. Live Nation Entertainment, Inc. (NYSE: LYV) was in 37 hedge fund portfolios at the end of March. The all-time high for this statistic is 50. Our calculations also showed that LYV is not in the top 30 most popular stocks among hedge funds (click for Q1 ranking).
The reputation of hedge funds as shrewd investors has been tarnished over the past decade as their hedged returns have not kept up with the unsecured returns of market indices. Our research has shown that hedge fund small-cap stock selection beat the market by double digits annually between 1999 and 2016, but the outperformance margin has been decreasing in recent years. Nevertheless, we were able to identify a selected group of hedge fund holdings in advance that exceeded the S&P 500 ETFs by 115 percentage points since March 2017 (details see here). We were also able to pre-identify a select group of hedge fund holdings that lagged the market by 10 percentage points annually between 2006 and 2017. Interestingly, the underperformance margin of these stocks has increased in recent years. Investors who take long positions in the market and short these stocks would have earned more than 27% annual return between 2015 and 2017. We’ve been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Jeffrey Tannenbaum by Tannenbaum
At Insider Monkey, we search multiple sources to discover the next great investment idea. Lithium mining is one example one of the fastest growing industries right now, so let’s take a look at such stock exchanges emerging lithium stock. We go over lists like the top 10 battery stocks to pick the next Tesla to deliver 10x the return. While we recommend positions in just a tiny fraction of the companies we analyze, we review as many stocks as possible. We read letters from hedge fund investors and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With that in mind, let’s go over the latest hedge fund promotion with Live Nation Entertainment, Inc. (NYSE: LYV).
Do hedge funds think LYV is a good stock to buy now?
At the beginning of the second quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were long on this stock, a change of -20% from the previous quarter. Below is the change in hedge fund sentiment towards LYV over the past 23 quarters. With hedge fund positions subject to their usual ups and downs, there are some notable hedge fund managers who have increased their stakes significantly (or have already built large positions).
Among those funds, Akre Capital Management held the most valuable stake in Live Nation Entertainment, Inc. (NYSE: LYV), valued at $ 463 million at the end of the fourth quarter. Second was Select Equity Group, which amassed $ 319.3 million in shares. Melvin Capital Management, Fir Tree, and Horizon Asset Management were also very fond of the stock and became one of the company’s largest hedge fund owners. In terms of the portfolio weights assigned to each position, Emerson Point gave Capital Live Nation Entertainment, Inc. (NYSE: LYV) the largest weight, approximately 6.66% of its 13F portfolio. Columbus Point is also relatively bullish on the stock, referring to 4.94 percent of its 13F stock portfolio for LYV.
Given that Live Nation Entertainment, Inc. (NYSE: LYV) has faced bearish sentiment on all of the hedge funds we track, the logic is that there was a specific group of hedge funds that chose to do so to reduce their total stocks in the first quarter. It’s worth noting that Philippe Laffont’s coatue management dropped the largest investment of any hedgie watched by Insider Monkey, at nearly $ 109.8 million in stocks. Daniel Sundheim’s fund, D1 Capital Partners, also lost approximately $ 65.5 million in its share. These bearish behaviors are intriguing to say the least, given that overall interest in hedge funds was cut by 9 funds in the first quarter.
Now let’s take a look at hedge fund activity in other stocks similar to Live Nation Entertainment, Inc. (NYSE: LYV). We’ll be looking at Conagra Brands, Inc. (NYSE: CAG), United Airlines Holdings Inc (NASDAQ: UAL), Cheniere Energy, Inc. (NYSE: LNG), Amcor plc (NYSE: AMCR), Caesars Entertainment Inc. (NASDAQ: CZR), Affirm Holdings, Inc. (NASDAQ: AFRM), and Expeditors International of Washington, Inc. (NASDAQ: EXPD). The market capitalization of this group of stocks is similar to the market capitalization of LYV.
[table] Ticker, number of HRs with positions, total value of HR positions (x1000), change in HR position CAG, 30.700335.2 UAL, 38.1024160, -14 LNG, 40.2549760.2 AMCR, 17.226541, – 2 CZR, 76, 1520267.5 AFRM, 32.582516.32 EXPD, 21.440396, -4 avg, 36.3.1006282.3 [/table]
View the table here if you have formatting problems.
As you can see, these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $ 1006 million. In the case of LYV, that figure was $ 1,325 million. Caesars Entertainment Inc. (NASDAQ: CZR) is the most popular stock on this table. On the flip side, Amcor plc (NYSE: AMCR) is the least popular, with only 17 bullish hedge fund positions. Live Nation Entertainment, Inc. (NYSE: LYV) isn’t the most popular stock in this group, but interest in hedge funds is still above average. Our hedge fund sentiment score for LYV is 35.1 overall. Stocks with a higher number of hedge fund positions relative to other stocks and relative to their historical range receive a higher sentiment score. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, outperforming the S&P 500 ETF (SPY) by 40 percentage points. These stocks rose 19.3% in 2021 through June 25, still outperforming the market by 4.8 percentage points. Hedge funds were also right in betting on LYV, albeit not to the same extent, as the stock has returned 9.4% since the first quarter (through June 25) and also outperformed the market.
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Disclosure: None. This article was originally published on Insider Monkey.