Hedge fund activity is an essential indicator for individual investors to follow. On an aggregate level, the smart money’s sentiment can be used as a screening technique to determine which stocks are the best investments in a particular industry. At Insider Monkey, our empirical research shows that individuals who mimic hedge funds can beat the market by double-digits annually (see the details of our market-beating strategy here).
S&P calls 2013 a “transition year” for the advertising industry, with a secular shift toward digital billboards offset by a fewer top-dollar opportunities like the Olympics, for example. Still, over the long term, advertising companies can be an integral part of any investor’s portfolio. By using our database of 13F filings with the SEC, we can take a look at just how hedge funds are playing this space.
Of the 400+ hedge funds we track, Interpublic Group of Companies, Inc. (NYSE:IPG) is the most popular advertising stock, held by 27 money managers at the end of the last 13F filing period. Interpublic Group has generated impressive rates of return across the board, and has grown its earnings by an average of 10.5% a year over the past half-decade. Growth is expected to slow a few ticks going forward to the high-single digits, but the company’s generally aggressive acquisitive efforts have most analysts bullish. Wall Street’s average price target on IPG represents an 8-9% upside from current levels, and a dividend yield close to 2% offers income-seeking investors comfort as well.
Tied with Interpublic we have Lamar Advertising Co (NASDAQ:LAMR), which is the top small-cap pick of one hedge fund in particular (see which hedge fund on Insider Monkey). Lamar has some of the most impressive growth prospects in this industry, with a transition to digital billboards driving the sell-side’s extreme current-year (120%) and year-ahead (262%) bottom line growth forecasts.
Shares of Lamar are generally overvalued, but this momentum-driven stock can see further gains if it outpaces the Street’s quarterly EPS estimates next month. Analysts are expecting Lamar to finish its fiscal fourth quarter with earnings of 10 cents a share, which would represent a 43% growth from last year. Worth noting is that Lamar did issue light EPS totals last quarter despite beating on revenues; we’ll be watching the company’s report closely.
Who’s the best of the rest?