“The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery,” This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
The Madison Square Garden Company (NYSE:MSG) has experienced an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that MSG isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the new hedge fund action regarding The Madison Square Garden Company (NYSE:MSG).
Hedge fund activity in The Madison Square Garden Company (NYSE:MSG)
At Q1’s end, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2018. By comparison, 36 hedge funds held shares or bullish call options in MSG a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in The Madison Square Garden Company (NYSE:MSG) was held by Silver Lake Partners, which reported holding $556.9 million worth of stock at the end of March. It was followed by GAMCO Investors with a $228.3 million position. Other investors bullish on the company included Blue Harbour Group, Mason Capital Management, and Citadel Investment Group.
As aggregate interest increased, key money managers were breaking ground themselves. Mason Capital Management, managed by Kenneth Mario Garschina, assembled the most outsized position in The Madison Square Garden Company (NYSE:MSG). Mason Capital Management had $94.1 million invested in the company at the end of the quarter. Keith Meister’s Corvex Capital also initiated a $17.1 million position during the quarter. The following funds were also among the new MSG investors: Benjamin Pass’s TOMS Capital, D. E. Shaw’s D E Shaw, and Himanshu Gulati’s Antara Capital.
Let’s also examine hedge fund activity in other stocks similar to The Madison Square Garden Company (NYSE:MSG). These stocks are East West Bancorp, Inc. (NASDAQ:EWBC), Cemex SAB de CV (NYSE:CX), Qurate Retail, Inc. (NASDAQ:QRTEA), and Five Below Inc (NASDAQ:FIVE). This group of stocks’ market values resemble MSG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EWBC | 29 | 437635 | 2 |
| CX | 15 | 90996 | 5 |
| QRTEA | 33 | 725955 | -2 |
| FIVE | 38 | 487778 | 6 |
| Average | 28.75 | 435591 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $436 million. That figure was $1779 million in MSG’s case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Cemex SAB de CV (NYSE:CX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks The Madison Square Garden Company (NYSE:MSG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MSG, though not to the same extent, as the stock returned 0.8% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
