Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Nexstar Media Group, Inc. (NASDAQ:NXST) makes for a good investment right now.
Nexstar Media Group, Inc. (NASDAQ:NXST) investors should pay attention to an increase in hedge fund sentiment of late. NXST was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 35 hedge funds in our database with NXST positions at the end of the previous quarter. Our calculations also showed that NXST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Seth Klarman of Baupost Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action encompassing Nexstar Media Group, Inc. (NASDAQ:NXST).
Hedge fund activity in Nexstar Media Group, Inc. (NASDAQ:NXST)
At the end of the fourth quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the third quarter of 2019. By comparison, 34 hedge funds held shares or bullish call options in NXST 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.
Of the funds tracked by Insider Monkey, Baupost Group, managed by Seth Klarman, holds the biggest position in Nexstar Media Group, Inc. (NASDAQ:NXST). Baupost Group has a $234.5 million position in the stock, comprising 2.6% of its 13F portfolio. On Baupost Group’s heels is P2 Capital Partners, managed by Claus Moller, which holds a $199.4 million position; 14.6% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism include Peter S. Park’s Park West Asset Management, Jonathan Auerbach’s Hound Partners and Snehal Amin’s Windacre Partnership. In terms of the portfolio weights assigned to each position Isomer Partners allocated the biggest weight to Nexstar Media Group, Inc. (NASDAQ:NXST), around 20.19% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, setting aside 14.63 percent of its 13F equity portfolio to NXST.
As industrywide interest jumped, specific money managers were breaking ground themselves. Jericho Capital Asset Management, managed by Josh Resnick, initiated the largest position in Nexstar Media Group, Inc. (NASDAQ:NXST). Jericho Capital Asset Management had $34 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $14.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Wayne Cooperman’s Cobalt Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nexstar Media Group, Inc. (NASDAQ:NXST) but similarly valued. These stocks are Primerica, Inc. (NYSE:PRI), The Hanover Insurance Group, Inc. (NYSE:THG), IDACORP Inc (NYSE:IDA), and Amedisys Inc (NASDAQ:AMED). This group of stocks’ market caps match NXST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRI | 28 | 324417 | 2 |
| THG | 21 | 224949 | -7 |
| IDA | 24 | 342667 | 3 |
| AMED | 22 | 219759 | 0 |
| Average | 23.75 | 277948 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $1488 million in NXST’s case. Primerica, Inc. (NYSE:PRI) is the most popular stock in this table. On the other hand The Hanover Insurance Group, Inc. (NYSE:THG) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Nexstar Media Group, Inc. (NASDAQ:NXST) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately NXST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NXST were disappointed as the stock returned -45.6% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
