Were Hedge Funds Illusioned With Madison Square Garden Sports Corp. (MSGS)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Madison Square Garden Sports Corp. (NYSE:MSGS) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Madison Square Garden Sports Corp. (NYSE:MSGS) a healthy stock for your portfolio? Money managers were in a pessimistic mood. The number of long hedge fund bets went down by 2 lately. Madison Square Garden Sports Corp. (NYSE:MSGS) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. Our calculations also showed that MSGS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 37 hedge funds in our database with MSGS positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to take a peek at the new hedge fund action surrounding Madison Square Garden Sports Corp. (NYSE:MSGS).

John Rogers of Ariel Investments

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

Heading into the fourth quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2021. By comparison, 48 hedge funds held shares or bullish call options in MSGS a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Silver Lake Partners held the most valuable stake in Madison Square Garden Sports Corp. (NYSE:MSGS), which was worth $353.3 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $160.6 million worth of shares. Ariel Investments, Long Pond Capital, and GAMCO Investors 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 Tiger Legatus Capital allocated the biggest weight to Madison Square Garden Sports Corp. (NYSE:MSGS), around 5.75% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, earmarking 5.47 percent of its 13F equity portfolio to MSGS.

Seeing as Madison Square Garden Sports Corp. (NYSE:MSGS) has experienced declining sentiment from the smart money, it’s easy to see that there is a sect of hedge funds that decided to sell off their full holdings heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $28.8 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $9.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Madison Square Garden Sports Corp. (NYSE:MSGS). We will take a look at DT Midstream Inc. (NYSE:DTM), John Bean Technologies Corporation (NYSE:JBT), Hawaiian Electric Industries, Inc. (NYSE:HE), Sprinklr Inc. (NYSE:CXM), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), MSC Industrial Direct Co Inc (NYSE:MSM), and Terreno Realty Corporation (NYSE:TRNO). All of these stocks’ market caps are closest to MSGS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $1144 million in MSGS’s case. MSC Industrial Direct Co Inc (NYSE:MSM) is the most popular stock in this table. On the other hand Sprinklr Inc. (NYSE:CXM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Madison Square Garden Sports Corp. (NYSE:MSGS) is more popular among hedge funds. Our overall hedge fund sentiment score for MSGS is 73.2. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, MSGS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MSGS were disappointed as the stock returned -10.7% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.

Suggested Articles:

• 25 Countries That Have The Most Debt Per Capita
• 10 Best REIT Stocks To Buy
• Billionaire John Paulson’s Top 10 Stock Picks

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