Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Madison Square Garden Entertainment Corp. (NYSE:MSGE) to find out whether there were any major changes in hedge funds’ views.
Is MSGE a good stock to buy? The smart money was cutting their exposure. The number of long hedge fund bets shrunk by 4 recently. Madison Square Garden Entertainment Corp. (NYSE:MSGE) was in 34 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. Our calculations also showed that MSGE isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we’re going to view the latest hedge fund action regarding Madison Square Garden Entertainment Corp. (NYSE:MSGE).
Do Hedge Funds Think MSGE Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in MSGE a year ago. 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 Madison Square Garden Entertainment Corp. (NYSE:MSGE) was held by Ariel Investments, which reported holding $109.4 million worth of stock at the end of September. It was followed by Silver Lake Partners with a $101.2 million position. Other investors bullish on the company included GAMCO Investors, Fir Tree, and Long Pond Capital. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Madison Square Garden Entertainment Corp. (NYSE:MSGE), around 5.95% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, setting aside 3.4 percent of its 13F equity portfolio to MSGE.
Judging by the fact that Madison Square Garden Entertainment Corp. (NYSE:MSGE) has faced a decline in interest from the aggregate hedge fund industry, we can see that there were a few fund managers who were dropping their positions entirely in the third quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $13 million in stock. John Smith Clark’s fund, Southpoint Capital Advisors, also dropped its stock, about $9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Madison Square Garden Entertainment Corp. (NYSE:MSGE). These stocks are Veoneer, Inc. (NASDAQ:VNE), Pebblebrook Hotel Trust (NYSE:PEB), Mueller Water Products, Inc. (NYSE:MWA), Navient Corp (NASDAQ:NAVI), Uniqure NV (NASDAQ:QURE), Amarin Corporation plc (NASDAQ:AMRN), and Adient plc (NYSE:ADNT). This group of stocks’ market caps match MSGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VNE | 10 | 128887 | -4 |
| PEB | 9 | 64842 | -4 |
| MWA | 24 | 220024 | 3 |
| NAVI | 22 | 167531 | -5 |
| QURE | 36 | 488681 | -13 |
| AMRN | 30 | 299242 | -2 |
| ADNT | 39 | 392944 | 4 |
| Average | 24.3 | 251736 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $376 million in MSGE’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 9 bullish hedge fund positions. Madison Square Garden Entertainment Corp. (NYSE:MSGE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MSGE is 69.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on MSGE as the stock returned 17.9% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Sphere Entertainment Co. (NYSE:SPHR)
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Disclosure: None. This article was originally published at Insider Monkey.
