The entertainment industry might be coming across bountiful growth opportunities at the moment, as the fast-growing demand for content does not seem to slow down any time soon. The never-ending mounting amount of content accessible through the Internet and the great abundance of innovative devices are the key factors that have propelled this demand. On top of that, the industry is facing some reformation as well, as the masses started to spend less time in front of TVs and started consuming the content through numerous remote devices whenever they seem appropriate instead. Having that in mind, the Insider Monkey team will lay out a list of the most favorite entertainment stocks within the hedge fund industry, which might represent great buying opportunities at the moment.
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Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because, as a group, their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 118% over the last 36 months and outperformed the S&P 500 Index by 61 percentage points (see the details here).
5. Regal Entertainment Group (NYSE:RGC)
Investors with Long Positions (as of June 30): 19
Aggregate Value of Investors’ Holdings (as of June 30): $111.41 Million
The number of hedge funds monitored by Insider Monkey with stakes in Regal Entertainment Group (NYSE:RGC) remained unchanged during the second quarter, accounting for 3.40% of the company’s common stock; while the value of their holdings grew by $12.37 million. The stock has been beaten down by the market over the last six months, declining almost 16% year-to-date. The largest theatre operator in the nation has been challenged by the declining number of customers over the past few years, according to Ricky Sandler. Regal operates in a steady-declining market, so the company should find new ways of generating growth in this environment. It appears that insiders are not fond of the company’s stock either, with Gregory W. Dunn, President and Chief Operating Officer, selling 19,000 shares at $21.4 per share earlier this year (his ownership stake stands at 109,724 shares). Jim Simons’ Renaissance Technologies owns 1.68 million shares of Regal Entertainment Group (NYSE:RGC) as of June 30.
