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Hedge Funds Love These Two Companies in Merger Talks

Lions Gate Entertainment Corp. (USA) (NYSE:LGF) and Starz (NASDAQ:STRZA) are reportedly in advance merger talks say four unnamed sources with knowledge of the situation, according to the Los Angeles Times. The news has sent the shares of Lionsgate and Starz soaring over 5% and more than 7%, respectively, in after-hours trading, as the deal would make a combined company better positioned to combat consolidating cable and satellite TV distributors. Hedge funds were also bullish on both companies heading into the third quarter, so let’s discuss the news in more detail and see how the smart money viewed both companies.

New York City Library Lion by sculptor Edward Clark Potter were dedicated in 1911.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by more than 60 percentage points (see...