Hedge Funds Aren’t Crazy About Madison Square Garden Sports Corp. (MSGS) Anymore

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Madison Square Garden Sports Corp. (NYSE:MSGS) based on those filings.

Madison Square Garden Sports Corp. (NYSE:MSGS) has seen a decrease in hedge fund sentiment in recent months. Madison Square Garden Sports Corp. (NYSE:MSGS) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistic is 52. There were 47 hedge funds in our database with MSGS holdings at the end of March. Our calculations also showed that MSGS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Madison Square Garden Sports Corp. (NYSE:MSGS).

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

At the end of June, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 43 hedge funds with a bullish position in MSGS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Silver Lake Partners held the most valuable stake in Madison Square Garden Sports Corp. (NYSE:MSGS), which was worth $327.9 million at the end of the second quarter. On the second spot was Long Pond Capital which amassed $156.6 million worth of shares. Southeastern Asset Management, GAMCO Investors, and Ariel Investments 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 Long Pond Capital allocated the biggest weight to Madison Square Garden Sports Corp. (NYSE:MSGS), around 5.44% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, earmarking 3.8 percent of its 13F equity portfolio to MSGS.

Since Madison Square Garden Sports Corp. (NYSE:MSGS) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that slashed their entire stakes last quarter. Intriguingly, Michael Doheny’s Freshford Capital Management said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising close to $21.8 million in stock. Eduardo Abush’s fund, Waterfront Capital Partners, also cut its stock, about $2.2 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 10 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Madison Square Garden Sports Corp. (NYSE:MSGS). These stocks are Box, Inc. (NYSE:BOX), EnerSys (NYSE:ENS), Axis Capital Holdings Limited (NYSE:AXS), JBG SMITH Properties (NYSE:JBGS), Tegna Inc (NYSE:TGNA), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and Univar Solutions Inc (NYSE:UNVR). This group of stocks’ market valuations resemble MSGS’s market valuation.

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As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $510 million. That figure was $955 million in MSGS’s case. Box, Inc. (NYSE:BOX) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Madison Square Garden Sports Corp. (NYSE:MSGS) is more popular among hedge funds. Our overall hedge fund sentiment score for MSGS is 66.3. 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. 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 returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on MSGS as the stock returned 8.3% since the end of June (through 10/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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