We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Outfront Media Inc (NYSE:OUT).
Is Outfront Media Inc (NYSE:OUT) ready to rally soon? Investors who are in the know are in a bearish mood at the margin. The number of bullish hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that OUT isn’t among the 30 most popular stocks among hedge funds (view the video below). OUT was in 22 hedge funds’ portfolios at the end of June. There were 25 hedge funds in our database with OUT positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. Let’s analyze the key hedge fund action encompassing Outfront Media Inc (NYSE:OUT).
Hedge fund activity in Outfront Media Inc (NYSE:OUT)
At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in OUT 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, Renaissance Technologies was the largest shareholder of Outfront Media Inc (NYSE:OUT), with a stake worth $92.9 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $56.6 million. Select Equity Group, Jericho Capital Asset Management, and Echo Street Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Outfront Media Inc (NYSE:OUT) has experienced falling interest from the smart money, logic holds that there exists a select few fund managers who were dropping their full holdings by the end of the second quarter. Interestingly, Glenn Russell Dubin’s Highbridge Capital Management dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $13.2 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund said goodbye to about $10.2 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Outfront Media Inc (NYSE:OUT) but similarly valued. These stocks are NorthWestern Corporation (NYSE:NWE), Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), Q2 Holdings Inc (NYSE:QTWO), and Evercore Inc. (NYSE:EVR). All of these stocks’ market caps are similar to OUT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWE | 15 | 188258 | 0 |
| RBA | 12 | 126049 | -3 |
| QTWO | 21 | 113950 | 6 |
| EVR | 26 | 483070 | 1 |
| Average | 18.5 | 227832 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $344 million in OUT’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) is the least popular one with only 12 bullish hedge fund positions. Outfront Media Inc (NYSE:OUT) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on OUT as the stock returned 9.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
