Top 5 Advertising Companies Loved By Hedge Funds: Interpublic Group of Companies, Inc. (IPG), Lamar Advertising Co (LAMR) & More

In third place sits Omnicom Group Inc. (NYSE:OMC), another key player in the global advertising industry. The agencies under Omnicom’s banner include DDB and BBDO, among others, and the company’s more modest growth prospects have left it undervalued by investors. The sell-side predicts Omnicom to grow its earnings by 8-9% a year over the next half-decade, almost 3 percentage points higher than average growth since 2007. The stock trades at a mere 13.7 times forward earnings and is priced at a 26% discount to its industry’s average. Omnicom also offers a higher dividend yield (2.2%) than both Lamar and Interpublic.

The fourth most popular advertising stock among hedge funds is Focus Media Holding Limited (NASDAQ:FMCN). Focus Media has a greater focus on video ads than its aforementioned peers, and offers products in movie theatres, retailers, and other heavily frequented areas. As can probably be expected, this business has given Focus Media more stability in comparison to most players in this industry. It has beaten the Street’s earnings in the last five consecutive consecutive quarters, and revenue totals have been impressive as well. Of the 7 analysts who cover Focus Media, 6 have buy ratings on the stock, and the group’s price target indicates that a 30% upside is expected from current levels. It’s easy to see why this stock is a hedge fund favorite.

Last but certainly not least we have National CineMedia, Inc. (NASDAQ:NCMI), held by 13 of the hedgies we track. National CineMedia focuses on advertising within movie theatres, and is actually a joint venture between Regal, AMC and Cinemark. National CineMedia has generated relatively unimpressive earnings recently, missing the Street’s Q3 estimates by 5.5%.

A reliance on one particular marketplace can affect results, though, and in the long run, the sell-side expects EPS growth to come around 7-8% over the next five years—nearly double that of its historical average. A sky-high dividend yield near 6% is a nice bonus for a stock that has returned 12.3% over the past year. One of the most bullish hedge fund managers in this stock is Jim Simons’ Renaissance Technologies (see Jim Simons’ favorite stock picks).

Disclosure: I have no positions in any of the stocks mentioned above