It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Saga Communications, Inc. (NASDAQ:SGA).
Is Saga Communications, Inc. (NASDAQ:SGA) a buy here? Investors who are in the know are taking a bullish view. The number of long hedge fund bets improved by 1 in recent months. Our calculations also showed that SGA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SGA was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 3 hedge funds in our database with SGA 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
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. Now we’re going to check out the key hedge fund action encompassing Saga Communications, Inc. (NASDAQ:SGA).
Hedge fund activity in Saga Communications, Inc. (NASDAQ:SGA)
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SGA over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Saga Communications, Inc. (NASDAQ:SGA), worth close to $9.4 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $5.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include David P. Cohen’s Minerva Advisors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital and . In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Saga Communications, Inc. (NASDAQ:SGA), around 2.33% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to SGA.
As aggregate interest increased, some big names have been driving this bullishness. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, created the most outsized position in Saga Communications, Inc. (NASDAQ:SGA). Springbok Capital had $0 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Saga Communications, Inc. (NASDAQ:SGA) but similarly valued. These stocks are Uranium Energy Corp. (NYSE:UEC), Exela Technologies, Inc. (NASDAQ:XELA), Safe Bulkers, Inc. (NYSE:SB), and Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK). All of these stocks’ market caps resemble SGA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UEC | 6 | 2957 | -5 |
| XELA | 7 | 32646 | -2 |
| SB | 7 | 10705 | 2 |
| PEBK | 2 | 16409 | 0 |
| Average | 5.5 | 15679 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $19 million in SGA’s case. Exela Technologies, Inc. (NASDAQ:XELA) is the most popular stock in this table. On the other hand Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) is the least popular one with only 2 bullish hedge fund positions. Saga Communications, Inc. (NASDAQ:SGA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 SGA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SGA investors were disappointed as the stock returned 3.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.