Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Entercom Communications Corp. (NYSE:ETM) has seen a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that ETM isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the fresh hedge fund action encompassing Entercom Communications Corp. (NYSE:ETM).
What does smart money think about Entercom Communications Corp. (NYSE:ETM)?
At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ETM over the last 16 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.
The largest stake in Entercom Communications Corp. (NYSE:ETM) was held by Sessa Capital, which reported holding $26.1 million worth of stock at the end of March. It was followed by GoldenTree Asset Management with a $12 million position. Other investors bullish on the company included Tensile Capital, Citadel Investment Group, and Lonestar Capital Management.
Seeing as Entercom Communications Corp. (NYSE:ETM) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of funds who were dropping their positions entirely last quarter. At the top of the heap, Amit Nitin Doshi’s Harbor Spring Capital sold off the biggest investment of the 750 funds tracked by Insider Monkey, totaling close to $18.4 million in stock. Renaissance Technologies, also said goodbye to its stock, about $3.9 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Entercom Communications Corp. (NYSE:ETM). We will take a look at Urstadt Biddle Properties Inc (NYSE:UBA), Nanometrics Incorporated (NASDAQ:NANO), Fiverr International Ltd. (NYSE:FVRR), and The Buckle, Inc. (NYSE:BKE). This group of stocks’ market values are closest to ETM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBA | 8 | 29719 | 0 |
| NANO | 17 | 118001 | 1 |
| FVRR | 9 | 39108 | 9 |
| BKE | 14 | 20363 | 3 |
| Average | 12 | 51798 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $79 million in ETM’s case. Nanometrics Incorporated (NASDAQ:NANO) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc (NYSE:UBA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Entercom Communications Corp. (NYSE:ETM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ETM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ETM were disappointed as the stock returned -42.1% during the third 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
