Did Hedge Funds Make The Right Call On Entercom Communications Corp. (ETM) ?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtEntercom Communications Corp. (NYSE:ETM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Entercom Communications Corp. (NYSE:ETM) has seen a decrease in hedge fund sentiment of late. ETM was in 17 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with ETM positions at the end of the previous quarter. Our calculations also showed that ETM 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).

Video: 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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. 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. Keeping this in mind let’s take a glance at the fresh hedge fund action encompassing Entercom Communications Corp. (NYSE:ETM).

What have hedge funds been doing with Entercom Communications Corp. (NYSE:ETM)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ETM over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Tensile Capital was the largest shareholder of Entercom Communications Corp. (NYSE:ETM), with a stake worth $3.5 million reported as of the end of September. Trailing Tensile Capital was Solas Capital Management, which amassed a stake valued at $2.9 million. Lonestar Capital Management, Citadel Investment Group, and Minerva Advisors 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 Solas Capital Management allocated the biggest weight to Entercom Communications Corp. (NYSE:ETM), around 3.15% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, designating 1.29 percent of its 13F equity portfolio to ETM.

Since Entercom Communications Corp. (NYSE:ETM) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds who were dropping their positions entirely in the first quarter. It’s worth mentioning that John Petry’s Sessa Capital sold off the largest position of the 750 funds followed by Insider Monkey, comprising close to $13.5 million in stock. Steven Tananbaum’s fund, GoldenTree Asset Management, also dumped its stock, about $2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Entercom Communications Corp. (NYSE:ETM) but similarly valued. These stocks are Tellurian Inc. (NASDAQ:TELL), SC Health Corporation (NYSE:SCPE), Jumia Technologies AG (NYSE:JMIA), and Atlantic Power Corp (NYSE:AT). This group of stocks’ market caps are similar to ETM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TELL 6 1521 -5
SCPE 16 57393 -1
JMIA 6 7689 0
AT 10 22041 -2
Average 9.5 22161 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $13 million in ETM’s case. SC Health Corporation (NYSE:SCPE) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Entercom Communications Corp. (NYSE:ETM) 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 ETM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ETM were disappointed as the stock returned -18.1% 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.