Did Hedge Funds Make The Right Call On Gray Television, Inc. (GTN) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Gray Television, Inc. (NYSE:GTN) and determine whether hedge funds skillfully traded this stock.

Is Gray Television, Inc. (NYSE:GTN) going to take off soon? Prominent investors were in a bearish mood. The number of long hedge fund bets went down by 3 in recent months. Our calculations also showed that GTN 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.

David Harding

David Harding of Winton Capital Management

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 the world 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. With all of this in mind let’s take a peek at the latest hedge fund action regarding Gray Television, Inc. (NYSE:GTN).

What have hedge funds been doing with Gray Television, Inc. (NYSE:GTN)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the fourth quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in GTN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is GTN A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Anand Desai’s Darsana Capital Partners has the number one position in Gray Television, Inc. (NYSE:GTN), worth close to $85.9 million, comprising 4.1% of its total 13F portfolio. The second largest stake is held by Randall Smith of Alden Global Capital, with a $10.6 million position; 3.3% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions contain Clint Carlson’s Carlson Capital, Leon Cooperman’s Omega Advisors and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position Sound Point Capital allocated the biggest weight to Gray Television, Inc. (NYSE:GTN), around 4.58% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, designating 4.06 percent of its 13F equity portfolio to GTN.

Judging by the fact that Gray Television, Inc. (NYSE:GTN) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedge funds who were dropping their positions entirely in the first quarter. Interestingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at close to $3.2 million in stock. Amir Mokari’s fund, Emerson Point Capital, also said goodbye to its stock, about $2.3 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Gray Television, Inc. (NYSE:GTN) but similarly valued. These stocks are Myriad Genetics, Inc. (NASDAQ:MYGN), United States Steel Corporation (NYSE:X), Kaman Corporation (NYSE:KAMN), and IAMGOLD Corporation (NYSE:IAG). All of these stocks’ market caps are closest to GTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYGN 11 102643 -4
X 17 36676 -9
KAMN 13 137686 -6
IAG 17 107106 0
Average 14.5 96028 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $132 million in GTN’s case. United States Steel Corporation (NYSE:X) is the most popular stock in this table. On the other hand Myriad Genetics, Inc. (NASDAQ:MYGN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Gray Television, Inc. (NYSE:GTN) 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 but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on GTN, though not to the same extent, as the stock returned 31.6% since Q1 and outperformed the market as well.

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