Some time ago, when mobile advertising was still in its infancy, experts were concerned about how traditional advertising and marketing firms would be able to sustain and grow their business in the rapidly changing advertising landscape. What concerned parties forgot was that some of these ad agencies had been in business for decades, during which time they successfully managed to shift towards the most popular mediums of those eras, from print to broadcast to digital.
The truth is that regardless of the medium, day, or age, a good copy or concept will always find takers and as long as an advertising or marketing firm can ensure that it’s coming up with great ideas, it will always be in business. In this post, we will take a look at the five most popular advertising and marketing stocks among the hedge funds in our database as of March 31, to give readers a glimpse at the firms which top investors have the most faith in, now and in the ever-changing advertising future.
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 RetailMeNot Inc (NASDAQ:SALE)
– Investors with long positions (as of March 31): 15
– Aggregate value of investors’ holdings (as of March 31): $41.76 million
Let’s start with online offers and discounts company RetailMeNot Inc (NASDAQ:SALE). During the first quarter, the ownership of the company among the funds that we track remained unchanged, but the aggregate value of their RetailMeNot holdings fell by 20.5%. RetailMeNot Inc (NASDAQ:SALE)’s stock has been on a gradual decline since February 2014. In the past 12 months, it has lost 56.7% of its value, including a 24.5% decline coming in 2016. Though the stock is trading at a very low enterprise-value-to-EBITDA multiple, several analysts are concerned about the company increasing its stock-based compensation for its executives when its business is going downhill, and are advising investors to stay away from the stock. Billionaire Jim Simons‘ Renaissance Technologies upped its stake in the company by 26% to 1.53 million shares during the first quarter.
#4 Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
– Investors with long positions (as of March 31): 17
– Aggregate value of investors’ holdings (as of March 31): $67.53 million
The number of hedge funds in our database long Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) increased by two during the first quarter. However, the aggregate value of their holdings in the company dropped by $17.2 million during that time. Notable investors that increased their stake in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) during the first quarter included billionaire Ken Griffin‘s Citadel Investment Group, which upped its holding by 31% to 183,278 shares. Although shares of the outdoor advertising company have appreciated by just under 10% so far this year, they are still down by 44% since the beginning of 2015. Much of the decline has had less to do with the company itself and more to do with the financial issues faced by its majority owners, iHeartMedia. Because of that, some analysts feel that Clear Channel’s stock has been hit overly hard and will eventually rebound as the dust surrounding iHeartMedia’s financial stress settles down.
The shares of the three most popular ad agencies get a little free marketing on the next page.
#3 MDC Partners Inc (NASDAQ:MDCA)
– Investors with long positions (as of March 31): 19
– Aggregate value of investors’ holdings (as of March 31): $303.48 million
Moving on, despite its stock ending the first quarter with gains of nearly 10%, MDC Partners Inc (NASDAQ:MDCA) saw a drop in its popularity among hedge funds, as there were two less shareholders of the company in our database by the end of the quarter, while the aggregate value of their holdings in the stock dropped by 8.3%. MDC Partners Inc (NASDAQ:MDCA)’s stock suffered a big decline going into its first quarter earnings, which continued after the company reported its quarterly results. Owing largely to that decline, the stock is currently trading down by 19.89% year-to-date. While analysts had projected the company to report a loss of $0.10 per share on revenue of $323.48 million for the first quarter, MDC Partners delivered suffered a painful loss of $0.47 per share on revenue of $309 million. Richard Barrera‘s Roystone Capital Partners was one of the hedge funds that reduced its stake in the company during the quarter, by 24% to 2.6 million shares.
#2 Omnicom Group Inc. (NYSE:OMC)
– Investors with long positions (as of March 31): 25
– Aggregate value of investors’ holdings (as of March 31): $1.71 billion
Amid a 10% rally in Omnicom Group Inc. (NYSE:OMC)’s stock during the first quarter, the ownership of the company among the funds in our system increased by three and the aggregate value of their holdings in it rose by $73 million. Funds that initiated a stake in the company during the quarter included Neil Chriss‘ Hutchin Hill Capital, which purchased 71,000 Omnicom shares. Omnicom Group Inc. (NYSE:OMC) recently hiked its quarterly dividend by 10% to $0.55 per share, which translates into an annual dividend yield of 2.72%. On April 20, analysts at Barclays downgraded the stock to ‘Equal Weight’ from ‘Overweight’, but upped their price target on it to $90 from $82, which represents potential upside of over 10% from the stock’s current trading price.
#1 Interpublic Group of Companies Inc (NYSE:IPG)
– Investors with long positions (as of March 31): 37
– Aggregate value of investors’ holdings (as of March 31): $1.77 billion
Although the ownership of Interpublic Group of Companies Inc (NYSE:IPG) among the funds in our system remained unchanged during the first quarter, the aggregate value of their holdings in it fell by 20.8% during the period. Interpublic Group of Companies Inc (NYSE:IPG)’s stock has been on a consistent uptrend since the start of 2013, registering gains of 115% since that time. It recently made its 52-week high of $24.27 and is currently trading down by 1.63% in 2016. Despite the stellar rally in the stock over the past few years, it still sports a respectable annual dividend yield of 2.62%. Most analysts who cover Interpublic Group of Companies are optimistic about its future prospects. The stock currently sports an average rating of ‘Overweight’ and an average price target of $25.79 from the 16 leading analysts and research firms on the Street who track it. Among the funds that reduced their stake in Interpublic Group of Companies during the first quarter was billionaire Paul Singer‘s Elliott Management, which lowered its holding by 22% to 15.67 million shares.