The dust has now settled from the most recent round of hedge fund 13F filings. While these filings provide more information to the SEC than to the average investor, looking at the positions of the world’s most revered investors are buying and selling each quarter can provide some insight into their strategies helping the average investor generate some ideas themselves.
That being said, the average investor should never blindly follow a hedge fund titan into a position. There are many reasons why not, but the most important is that it is impossible to tell exactly why the fund manager has entered the position in the first place.
Without doing your own research on a particular stock, it’s easy to lose money. You may end up selling too early, buying too late or investing in an asset you would never usually own.
Still, 13Fs can be useful to identify trends and this quarter there are a few trends that stick out in the data.
13F trends – what value investors are buying
While compiling the quarterly 13F roundup for ValueWalk, I noticed that one company or group of companies is extremely popular with hedge funds of all investing styles this year.
The company in question is Liberty, or to be more specific, the Liberty Group of companies. Entities owned or managed by John Malone were the flavor of the second quarter.
LiLAC Group, Liberty’s Latin American and Caribbean operations traded under the symbols "LILA" and "LILAK," was picked up by some of the most revered value investors in the business or so it appears.
These equities were allocated as part of Liberty's reorganisation earlier this year but they still highlight how many fund managers are holding a position in the Liberty group of companies.
David Einhorn (Trades, Portfolio) of Greenlight Capital, Michael Larson who manages the Bill & Melinda Gates Foundation Trust, Glenn Greenberg (Trades, Portfolio) of Brave Warrior Advisors, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), Tom Gayner of Markel Asset Management and Lee Ainslie (Trades, Portfolio) of Maverick Capital added to or initiated new positions in the “LILA” ticker during the second quarter according to SEC filings. Meanwhile, John Griffin (Trades, Portfolio) of Blue Ridge Capital and Wallace Weitz (Trades, Portfolio) of Weitz Value built positions in the firm’s other ticker “LILAK.” Almost all of these value investors also own stock in Liberty Global Inc. (LBTYA, Financial) as well as the Latin American offshoot. Even though some of these weren't new buys it is an interesting trend to explore.
Another top 10 buy with value investors last quarter was Series C Liberty SiriusXM (SIRI, Financial), which is one of the three tracking stocks Liberty Media reorganized itself into earlier this year. Warren Buffett, Gayner, Weitz and Arnold Van Den Berg (Trades, Portfolio) of Century Management Advisers all initiated positions in the stock during the second quarter.
Not all Liberty
The Liberty reorganisation means that Liberty LiLAC Group C and Liberty LiLAC Group A appear to be the fourth- and fifth-most brought positions by hedge funds last quarter in terms of the number of funds buying.
At the top of the list, Google’s parent Alphabet Inc. (GOOG)(GOOGL) was the most bought by hedge funds last quarter, closely followed by Allergan (AGN, Financial) and Shire (SHPG, Financial). Outside the top five, the most bought companies based on the number of hedge funds buying were American Express (AXP, Financial), Microsoft (MSFT, Financial), Bank of America (BAC, Financial), Liberty SiriusXM and Wells Fargo (WFC, Financial). That’s the top 10. In position No. 11 of the “most bought” is Liberty Global. So, companies of the Liberty Group are four of the top 11 most bought positions by value hedge funds last quarter. That’s a huge vote of confidence in Malone’s leadership and the outlook for the company.
On the other hand, the three most sold stocks last quarter by the same group of hedge funds are Microsoft, Berkshire Hathaway and Apple (AAPL) in that order.
The John Malone factor
It looks as if value hedge funds are investing in Liberty to gain exposure to Malone’s impressive leadership skills and value creation.
I looked at Malone’s impressive history of value creation in an article for GuruFocus last month. As I wrote at the time, over the past four decades Malone has produced an estimated total return for investors over the years of 23% CAGR.
An investment of $100 with Malone in 1973 would be worth $315,337 (CAGR 23%) today compared to only $7,308 for a similar investment in the Standard & Poor's 500 over the same period. Shares in Liberty-owned companies have come under pressure this year due to concerns about cord cutting and high levels of debt, but it would appear that the world’s greatest value investors believe these declines are overdone.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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