Did Hedge Funds Make The Right Call On comScore, Inc. (SCOR)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded comScore, Inc. (NASDAQ:SCOR) and determine whether the smart money was really smart about this stock.

Is comScore, Inc. (NASDAQ:SCOR) ready to rally soon? The smart money was in a pessimistic mood. The number of bullish hedge fund positions fell by 1 recently. Our calculations also showed that SCOR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SCOR was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with SCOR positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a peek at the key hedge fund action encompassing comScore, Inc. (NASDAQ:SCOR).

Hedge fund activity in comScore, Inc. (NASDAQ:SCOR)

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SCOR over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Tenzing Global Investors held the most valuable stake in comScore, Inc. (NASDAQ:SCOR), which was worth $12.4 million at the end of the third quarter. On the second spot was Starboard Value LP which amassed $8.4 million worth of shares. Clearline Capital, Lion Point, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Roumell Asset Management allocated the biggest weight to comScore, Inc. (NASDAQ:SCOR), around 7.66% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, earmarking 6.85 percent of its 13F equity portfolio to SCOR.

Seeing as comScore, Inc. (NASDAQ:SCOR) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of fund managers who were dropping their full holdings heading into Q4. Intriguingly, Robert G. Moses’s RGM Capital cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $10 million in stock. Joseph Samuels’s fund, Islet Management, also dumped its stock, about $3.5 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to comScore, Inc. (NASDAQ:SCOR). These stocks are Transcat, Inc. (NASDAQ:TRNS), NACCO Industries, Inc. (NYSE:NC), Hurco Companies, Inc. (NASDAQ:HURC), and Genesco Inc. (NYSE:GCO). This group of stocks’ market caps resemble SCOR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRNS 7 36708 -1
NC 5 10318 -4
HURC 5 31460 -1
GCO 11 9290 -10
Average 7 21944 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $60 million in SCOR’s case. Genesco Inc. (NYSE:GCO) is the most popular stock in this table. On the other hand NACCO Industries, Inc. (NYSE:NC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks comScore, Inc. (NASDAQ:SCOR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately SCOR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SCOR were disappointed as the stock returned 10.6% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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