Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Media General, Inc. (NYSE:MEG) changed recently.
Media General, Inc. (NYSE:MEG) has experienced an increase in enthusiasm from smart money in recent months. MEG was in 25 hedge funds’ portfolios at the end of the third quarter of 2015. There were 24 hedge funds in our database with MEG positions at the end of the previous quarter. 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 MKS Instruments, Inc. (NASDAQ:MKSI), Lexmark International Inc (NYSE:LXK), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD) to gather more data points.
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Keeping this in mind, let’s take a look at the fresh action regarding Media General, Inc. (NYSE:MEG).
How are hedge funds trading Media General, Inc. (NYSE:MEG)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Media General, Inc. (NYSE:MEG). GAMCO Investors has a $84.8 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Starboard Value LP, led by Jeffrey Smith, holding a $74.9 million position; 1.7% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Warren Buffett’s Berkshire Hathaway, Richard Barrera’s Roystone Capital Partners and James Dondero’s Highland Capital Management.
Consequently, key hedge funds were breaking ground themselves. Starboard Value LP, managed by Jeffrey Smith, established the largest position in Media General, Inc. (NYSE:MEG). Starboard Value LP had $74.9 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann’s TIG Advisors also initiated a $22.5 million position during the quarter. The other funds with brand new MEG positions are Clint Carlson’s Carlson Capital, Jeffrey Smith’s Starboard Value LP, and Richard Barrera’s Roystone Capital Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Media General, Inc. (NYSE:MEG) but similarly valued. These stocks are MKS Instruments, Inc. (NASDAQ:MKSI), Lexmark International Inc (NYSE:LXK), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and The Buckle, Inc. (NYSE:BKE). This group of stocks’ market values are similar to MEG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKSI | 23 | 350198 | 1 |
| LXK | 21 | 392937 | -1 |
| CSOD | 21 | 261329 | -1 |
| BKE | 16 | 258393 | 3 |
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $316 million. That figure was $496 million in MEG’s case. MKS Instruments, Inc. (NASDAQ:MKSI) is the most popular stock in this table. On the other hand The Buckle, Inc. (NYSE:BKE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Media General, Inc. (NYSE:MEG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
