Is Liberty Latin America Ltd. (LILAK) A Good Stock To Buy?

·6 min read

In this article we will take a look at whether hedge funds think Liberty Latin America Ltd. (NASDAQ:LILAK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Liberty Latin America Ltd. (NASDAQ:LILAK) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Liberty Latin America Ltd. (NASDAQ:LILAK) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistic is 62. Our calculations also showed that LILAK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are several metrics stock market investors can use to size up publicly traded companies. A pair of the less utilized metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace their index-focused peers by a healthy margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. With all of this in mind we're going to view the fresh hedge fund action encompassing Liberty Latin America Ltd. (NASDAQ:LILAK).

Do Hedge Funds Think LILAK Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in LILAK a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is LILAK A Good Stock To Buy?
Is LILAK A Good Stock To Buy?

More specifically, Ashe Capital was the largest shareholder of Liberty Latin America Ltd. (NASDAQ:LILAK), with a stake worth $174.8 million reported as of the end of June. Trailing Ashe Capital was Two Creeks Capital Management, which amassed a stake valued at $91.1 million. Fine Capital Partners, Canyon Capital Advisors, and Wallace R. Weitz & Co. 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 Ashe Capital allocated the biggest weight to Liberty Latin America Ltd. (NASDAQ:LILAK), around 10.78% of its 13F portfolio. Fine Capital Partners is also relatively very bullish on the stock, dishing out 8.35 percent of its 13F equity portfolio to LILAK.

Since Liberty Latin America Ltd. (NASDAQ:LILAK) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their positions entirely last quarter. At the top of the heap, Stephen C. Freidheim's Cyrus Capital Partners dumped the largest investment of all the hedgies followed by Insider Monkey, totaling about $11.1 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dropped about $1.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Liberty Latin America Ltd. (NASDAQ:LILAK) but similarly valued. These stocks are Spirit Airlines Incorporated (NASDAQ:SAVE), 21Vianet Group Inc (NASDAQ:VNET), Clearway Energy, Inc. (NYSE:CWEN), Welbilt, Inc. (NYSE:WBT), AAON, Inc. (NASDAQ:AAON), Insmed Incorporated (NASDAQ:INSM), and Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE). This group of stocks' market caps resemble LILAK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAVE,29,247716,5 VNET,23,264551,-7 CWEN,21,187962,-3 WBT,44,984182,16 AAON,17,42863,1 INSM,22,568387,0 CERE,19,358524,-3 Average,25,379169,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $557 million in LILAK's case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 17 bullish hedge fund positions. Liberty Latin America Ltd. (NASDAQ:LILAK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LILAK is 34.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately LILAK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LILAK were disappointed as the stock returned -9.4% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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