How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Tribune Publishing Company (NASDAQ:TPCO) and determine whether hedge funds had an edge regarding this stock.
Hedge fund interest in Tribune Publishing Company (NASDAQ:TPCO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Blue Bird Corporation (NASDAQ:BLBD), Casa Systems, Inc. (NASDAQ:CASA), and Watford Holdings Ltd. (NASDAQ:WTRE) to gather more data points. Our calculations also showed that TPCO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a lot of indicators investors employ to size up publicly traded companies. A duo of the most useful indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass their index-focused peers by a significant margin (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 8 states that allow euthanasia to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the fresh hedge fund action regarding Tribune Publishing Company (NASDAQ:TPCO).
How are hedge funds trading Tribune Publishing Company (NASDAQ:TPCO)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TPCO over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Randall Smith’s Alden Global Capital has the largest position in Tribune Publishing Company (NASDAQ:TPCO), worth close to $93.6 million, accounting for 29.6% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $6.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism contain Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Jeremy Hosking’s Hosking Partners. In terms of the portfolio weights assigned to each position Alden Global Capital allocated the biggest weight to Tribune Publishing Company (NASDAQ:TPCO), around 29.55% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, setting aside 0.41 percent of its 13F equity portfolio to TPCO.
Judging by the fact that Tribune Publishing Company (NASDAQ:TPCO) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their entire stakes in the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $2.5 million in stock, and Dennis Leibowitz’s Act II Capital was right behind this move, as the fund cut about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Tribune Publishing Company (NASDAQ:TPCO). These stocks are Blue Bird Corporation (NASDAQ:BLBD), Casa Systems, Inc. (NASDAQ:CASA), Watford Holdings Ltd. (NASDAQ:WTRE), and REX American Resources Corp (NYSE:REX). This group of stocks’ market values are similar to TPCO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLBD | 9 | 21205 | -3 |
| CASA | 6 | 3172 | -4 |
| WTRE | 7 | 7810 | 0 |
| REX | 7 | 25263 | -1 |
| Average | 7.25 | 14363 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $102 million in TPCO’s case. Blue Bird Corporation (NASDAQ:BLBD) is the most popular stock in this table. On the other hand Casa Systems, Inc. (NASDAQ:CASA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Tribune Publishing Company (NASDAQ:TPCO) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately TPCO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TPCO were disappointed as the stock returned 18.2% during the second quarter (through June 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
