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Hedge Funds Aren’t Overly Bullish on Publishing Stocks

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The U.S. newspaper publishing industry has been considered a dying industry in recent years amid fast-declining print readership. Constantly changing consumer preferences and the emergence of innovative technologies has transformed entirely the way news stories are offered by newspaper companies and read by consumers. Indeed, advertising continues to represent a major revenue stream for the industry, so publishing companies have been busy adapting to the fast-changing face of the so-called multi-platform media universe. However, investor worries over the forthcoming death of the publishing industry seem to be greatly exaggerated, as the industry simply experiences an evolution because of the prevalence of new technology that enable readers to consume content on-the-go. Having this in mind, let’s have a look at five publishing stocks favored by the hedge funds followed by Insider Monkey, some of which may represent great winners in the foreseeable future should they successfully adapt to a new order.

Brian A Jackson/Shutterstock.com

Brian A Jackson/Shutterstock.com

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#5. Scholastic Corp (NASDAQ:SCHL)

– Investors with long positions as of March 31: 13

– Aggregate value of investors’ holdings as of March 31: $92.33 Million

The hedge fund sentiment towards Scholastic Corp (NASDAQ:SCHL) fell in the first quarter of 2016, as the number of asset managers from our database with long positions in the company declined to 13 from 16 quarter-over-quarter. Correspondingly, the overall value of those long positions shrunk by 21% quarter-on-quarter to $92.33 million. Given that Scholastic shares lost nearly 3% during the quarter, some funds were indeed running away from the company. The publishing house has seen its shares advance by 10% in the past three months, but the stock is up by less than 1% year-to-date. The publisher of the Harry Potter series recorded revenues of $1.16 billion for the nine months that ended February 29, up from $1.15 billion posted for the same period of the prior year. The increase was mainly driven by increased demand for Harry Potter-related titles coupled with strong demand for frontlist titles. Royce & Associates, founded by Chuck Royce, reported ownership of 2.09 million shares of Scholastic Corp (NASDAQ:SCHL) in the latest round of 13Fs.

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