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Did Hedge Funds Make The Right Call On The New York Times Company (NYT) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The New York Times Company (NYSE:NYT) and determine whether hedge funds had an edge regarding this stock.

The New York Times Company (NYSE:NYT) was in 33 hedge funds’ portfolios at the end of March. NYT shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 35 hedge funds in our database with NYT positions at the end of the previous quarter. Our calculations also showed that NYT 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.

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the new hedge fund action surrounding The New York Times Company (NYSE:NYT).

How are hedge funds trading The New York Times Company (NYSE:NYT)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NYT over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NYT A Good Stock To Buy?

More specifically, Darsana Capital Partners was the largest shareholder of The New York Times Company (NYSE:NYT), with a stake worth $399.2 million reported as of the end of September. Trailing Darsana Capital Partners was Renaissance Technologies, which amassed a stake valued at $174.1 million. Palestra Capital Management, SoMa Equity Partners, and Slate Path Capital 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 Darsana Capital Partners allocated the biggest weight to The New York Times Company (NYSE:NYT), around 18.88% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, dishing out 12.8 percent of its 13F equity portfolio to NYT.

Judging by the fact that The New York Times Company (NYSE:NYT) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of funds that elected to cut their full holdings by the end of the first quarter. Intriguingly, Andrew Weiss’s Weiss Asset Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at about $30 million in stock. Charles Lemonides’s fund, Valueworks LLC, also sold off its stock, about $5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The New York Times Company (NYSE:NYT) but similarly valued. These stocks are The Madison Square Garden Company (NASDAQ:MSG), Athene Holding Ltd. (NYSE:ATH), Ingredion Incorporated (NYSE:INGR), and Aramark (NYSE:ARMK). This group of stocks’ market values match NYT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSG 41 1449012 -2
ATH 32 841044 -3
INGR 18 177212 -5
ARMK 29 595601 -7
Average 30 765717 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $766 million. That figure was $1415 million in NYT’s case. The Madison Square Garden Company (NASDAQ:MSG) is the most popular stock in this table. On the other hand Ingredion Incorporated (NYSE:INGR) is the least popular one with only 18 bullish hedge fund positions. The New York Times Company (NYSE:NYT) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NYT as the stock returned 37.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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