We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Salem Media Group, Inc. (NASDAQ:SALM).
Is Salem Media Group, Inc. (NASDAQ:SALM) the right pick for your portfolio? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund bets retreated by 1 in recent months. Our calculations also showed that SALM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SALM was in 4 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with SALM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s check out the recent hedge fund action surrounding Salem Media Group, Inc. (NASDAQ:SALM).
Hedge fund activity in Salem Media Group, Inc. (NASDAQ:SALM)
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SALM over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the largest position in Salem Media Group, Inc. (NASDAQ:SALM), worth close to $1 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Ancora Advisors, led by Frederick DiSanto, holding a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Renaissance Technologies, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Salem Media Group, Inc. (NASDAQ:SALM), around 0.02% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to SALM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bailard Inc. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SALM as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Salem Media Group, Inc. (NASDAQ:SALM) but similarly valued. We will take a look at HyreCar Inc. (NASDAQ:HYRE), Issuer Direct Corporation (NYSE:ISDR), Kingold Jewelry Inc., (NASDAQ:KGJI), and Tremont Mortgage Trust (NASDAQ:TRMT). This group of stocks’ market valuations match SALM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HYRE | 7 | 5406 | 4 |
| ISDR | 1 | 1219 | -1 |
| KGJI | 1 | 7 | 0 |
| TRMT | 1 | 210 | -1 |
| Average | 2.5 | 1711 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $2 million in SALM’s case. HyreCar Inc. (NASDAQ:HYRE) is the most popular stock in this table. On the other hand Issuer Direct Corporation (NYSE:ISDR) is the least popular one with only 1 bullish hedge fund positions. Salem Media Group, Inc. (NASDAQ:SALM) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SALM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SALM were disappointed as the stock returned -3.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
