Townsquare Media Inc (TSQ): Are Hedge Funds Right About This Stock?

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Townsquare Media Inc (NYSE:TSQ).

Is Townsquare Media Inc (NYSE:TSQ) a buy, sell, or hold? The best stock pickers were taking an optimistic view. The number of long hedge fund bets went up by 3 recently. Townsquare Media Inc (NYSE:TSQ) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 15. Our calculations also showed that TSQ isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to go over the new hedge fund action encompassing Townsquare Media Inc (NYSE:TSQ).

Do Hedge Funds Think TSQ Is A Good Stock To Buy Now?

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in TSQ a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Townsquare Media Inc (NYSE:TSQ) was held by MSD Capital, which reported holding $19.4 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $10.4 million position. Other investors bullish on the company included GAMCO Investors, Ancora Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position MSD Capital allocated the biggest weight to Townsquare Media Inc (NYSE:TSQ), around 22.56% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to TSQ.

As one would reasonably expect, some big names were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the most outsized position in Townsquare Media Inc (NYSE:TSQ). Two Sigma Advisors had $0.3 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new TSQ position is Greg Eisner’s Engineers Gate Manager.

Let’s now take a look at hedge fund activity in other stocks similar to Townsquare Media Inc (NYSE:TSQ). These stocks are RGC Resources, Inc. (NASDAQ:RGCO), MediciNova, Inc. (NASDAQ:MNOV), Performant Financial Corp (NASDAQ:PFMT), Team, Inc. (NYSE:TISI), Trecora Resources (NYSE:TREC), First Western Financial, Inc. (NASDAQ:MYFW), and Chemung Financial Corp. (NASDAQ:CHMG). All of these stocks’ market caps resemble TSQ’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $35 million in TSQ’s case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand RGC Resources, Inc. (NASDAQ:RGCO) is the least popular one with only 3 bullish hedge fund positions. Townsquare Media Inc (NYSE:TSQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TSQ is 63. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately TSQ wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TSQ were disappointed as the stock returned 1.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.