Was The Smart Money Right About ViacomCBS Inc. (VIAC)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ViacomCBS Inc. (NASDAQ:VIAC) in this article.

Hedge fund interest in ViacomCBS Inc. (NASDAQ:VIAC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VIAC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). 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 Ameriprise Financial, Inc. (NYSE:AMP), Old Dominion Freight Line (NASDAQ:ODFL), and Garmin Ltd. (NASDAQ:GRMN) to gather more data points.

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’ 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 124 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 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.

Seth Klarman of Baupost Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 let’s view the key hedge fund action encompassing ViacomCBS Inc. (NASDAQ:VIAC).

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

At the end of December, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2020. On the other hand, there were a total of 64 hedge funds with a bullish position in VIAC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

More specifically, Baupost Group was the largest shareholder of ViacomCBS Inc. (NASDAQ:VIAC), with a stake worth $175.1 million reported as of the end of December. Trailing Baupost Group was Ariel Investments, which amassed a stake valued at $137.5 million. Canyon Capital Advisors, GAMCO Investors, and Contrarius Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Voleon Capital allocated the biggest weight to ViacomCBS Inc. (NASDAQ:VIAC), around 5.57% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, designating 4.32 percent of its 13F equity portfolio to VIAC.

Judging by the fact that ViacomCBS Inc. (NASDAQ:VIAC) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there were a few funds who were dropping their full holdings in the fourth quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $34.7 million in stock, and Randall Smith’s Alden Global Capital was right behind this move, as the fund said goodbye to about $16.6 million worth. These moves are intriguing to say the least, as total 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 ViacomCBS Inc. (NASDAQ:VIAC). We will take a look at Ameriprise Financial, Inc. (NYSE:AMP), Old Dominion Freight Line (NASDAQ:ODFL), Garmin Ltd. (NASDAQ:GRMN), Ryanair Holdings plc (NASDAQ:RYAAY), FleetCor Technologies, Inc. (NYSE:FLT), Coca-Cola European Partners plc (NYSE:CCEP), and Viatris Inc. (NASDAQ:VTRS). This group of stocks’ market valuations are similar to VIAC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1231 million. That figure was $919 million in VIAC’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 23 bullish hedge fund positions. ViacomCBS Inc. (NASDAQ:VIAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIAC is 49.5. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately VIAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VIAC were disappointed as the stock returned 10.4% since the end of December (through 4/30) 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 many of these stocks already outperformed the market since 2019.

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