Did Hedge Funds Drop The Ball On COMSCORE, Inc. (SCOR)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like COMSCORE, Inc. (NASDAQ:SCOR).

Is COMSCORE, Inc. (NASDAQ:SCOR) the right pick for your portfolio? The smart money is taking an optimistic view. The number of long hedge fund positions advanced by 1 lately. Our calculations also showed that SCOR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SCOR was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds in our database with SCOR positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding COMSCORE, Inc. (NASDAQ:SCOR).

How are hedge funds trading COMSCORE, Inc. (NASDAQ:SCOR)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in SCOR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Marc Majzner’s Clearline Capital has the most valuable position in COMSCORE, Inc. (NASDAQ:SCOR), worth close to $7.2 million, comprising 3.3% of its total 13F portfolio. Coming in second is RGM Capital, managed by Robert G. Moses, which holds a $5.6 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Brian Bares’s Bares Capital Management, Didric Cederholm’s Lion Point and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Roumell Asset Management allocated the biggest weight to COMSCORE, Inc. (NASDAQ:SCOR), around 6.23% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, earmarking 3.28 percent of its 13F equity portfolio to SCOR.

Consequently, key hedge funds were breaking ground themselves. Tenzing Global Investors, managed by Chet Kapoor, established the largest position in COMSCORE, Inc. (NASDAQ:SCOR). Tenzing Global Investors had $2.7 million invested in the company at the end of the quarter. Jim Roumell’s Roumell Asset Management also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new SCOR investors: Cristan Blackman’s Empirical Capital Partners, David Harding’s Winton Capital Management, and David Atterbury’s Whetstone Capital Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as COMSCORE, Inc. (NASDAQ:SCOR) but similarly valued. These stocks are Bancorp of New Jersey, Inc (NYSEAMERICAN:BKJ), Sutter Rock Capital Corp. (NASDAQ:SSSS), TESSCO Technologies, Inc. (NASDAQ:TESS), and PRGX Global Inc (NASDAQ:PRGX). This group of stocks’ market values are similar to SCOR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKJ 4 7001 4
SSSS 8 6366 2
TESS 2 7032 -2
PRGX 7 37549 0
Average 5.25 14487 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $38 million in SCOR’s case. Sutter Rock Capital Corp. (NASDAQ:SSSS) is the most popular stock in this table. On the other hand TESSCO Technologies, Inc. (NASDAQ:TESS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks COMSCORE, Inc. (NASDAQ:SCOR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SCOR as the stock returned 114.1% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.