Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze The Madison Square Garden Company (NASDAQ:MSG) from the perspective of those elite funds.
The Madison Square Garden Company (NASDAQ:MSG) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. MSG was in 40 hedge funds’ portfolios at the end of September. There were 42 hedge funds in our database with MSG holdings at the end of the previous quarter. Our calculations also showed that MSG isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action encompassing The Madison Square Garden Company (NASDAQ:MSG).
How are hedge funds trading The Madison Square Garden Company (NASDAQ:MSG)?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in MSG heading into this year. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in The Madison Square Garden Company (NASDAQ:MSG) was held by Silver Lake Partners, which reported holding $400 million worth of stock at the end of September. It was followed by GAMCO Investors with a $250.1 million position. Other investors bullish on the company included Renaissance Technologies, Point72 Asset Management, and Jericho Capital Asset Management.
Since The Madison Square Garden Company (NASDAQ:MSG) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few money managers who were dropping their full holdings by the end of the third quarter. Interestingly, Alexander Mitchell’s Scopus Asset Management dumped the biggest stake of the 700 funds followed by Insider Monkey, worth an estimated $76 million in call options. Alexander Mitchell’s fund, Scopus Asset Management, also dropped its call options, about $46.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to The Madison Square Garden Company (NASDAQ:MSG). These stocks are EPAM Systems Inc (NYSE:EPAM), RingCentral Inc (NYSE:RNG), Logitech International SA (NASDAQ:LOGI), and Nutanix, Inc. (NASDAQ:NTNX). This group of stocks’ market values match MSG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPAM | 21 | 165154 | -1 |
| RNG | 42 | 1084469 | 2 |
| LOGI | 19 | 286411 | 3 |
| NTNX | 39 | 652637 | 5 |
| Average | 30.25 | 547168 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $547 million. That figure was $1.77 billion in MSG’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 19 bullish hedge fund positions. The Madison Square Garden Company (NASDAQ:MSG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RNG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
