How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gray Television, Inc. (NYSE:GTN) and determine whether hedge funds had an edge regarding this stock.
Gray Television, Inc. (NYSE:GTN) shareholders have witnessed an increase in enthusiasm from smart money lately. Gray Television, Inc. (NYSE:GTN) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that GTN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Leon Cooperman of Omega Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to check out the new hedge fund action encompassing Gray Television, Inc. (NYSE:GTN).
What does smart money think about Gray Television, Inc. (NYSE:GTN)?
At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the first quarter of 2020. On the other hand, there were a total of 25 hedge funds with a bullish position in GTN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Darsana Capital Partners was the largest shareholder of Gray Television, Inc. (NYSE:GTN), with a stake worth $76.2 million reported as of the end of September. Trailing Darsana Capital Partners was Omega Advisors, which amassed a stake valued at $14 million. Alden Global Capital, GAMCO Investors, and Hudson Bay Capital Management 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 Darsana Capital Partners allocated the biggest weight to Gray Television, Inc. (NYSE:GTN), around 4.52% of its 13F portfolio. Cumberland Associates / Springowl Associates is also relatively very bullish on the stock, setting aside 4.16 percent of its 13F equity portfolio to GTN.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Hudson Bay Capital Management, managed by Sander Gerber, assembled the biggest position in Gray Television, Inc. (NYSE:GTN). Hudson Bay Capital Management had $4.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.6 million position during the quarter. The other funds with brand new GTN positions are Lee Ainslie’s Maverick Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gray Television, Inc. (NYSE:GTN) but similarly valued. These stocks are Herman Miller, Inc. (NASDAQ:MLHR), Cooper Tire & Rubber Company (NYSE:CTB), Open Lending Corporation (NASDAQ:LPRO), Southwestern Energy Company (NYSE:SWN), Mack Cali Realty Corp (NYSE:CLI), Chesapeake Utilities Corporation (NYSE:CPK), and Frontline Ltd (NYSE:FRO). This group of stocks’ market values resemble GTN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MLHR | 22 | 113233 | 0 |
| CTB | 18 | 148991 | -2 |
| LPRO | 20 | 194829 | 2 |
| SWN | 15 | 111763 | -2 |
| CLI | 13 | 57434 | 3 |
| CPK | 9 | 20340 | 2 |
| FRO | 12 | 39536 | -12 |
| Average | 15.6 | 98018 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $135 million in GTN’s case. Herman Miller, Inc. (NASDAQ:MLHR) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Gray Television, Inc. (NYSE:GTN) is more popular among hedge funds. Our overall hedge fund sentiment score for GTN is 86.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately GTN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GTN were disappointed as the stock returned -0.6% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
