Hedge Funds Are Dumping Cumulus Media Inc (NASDAQ:CMLS)

In this article you are going to find out whether hedge funds think Cumulus Media Inc (NASDAQ:CMLS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Cumulus Media Inc (NASDAQ:CMLS) worth your attention right now? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund positions went down by 5 lately. Our calculations also showed that CMLS 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.

Gifford Combs - Dalton Investments

Gifford Combs of Dalton Investments

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 take a glance at the fresh hedge fund action surrounding Cumulus Media Inc (NASDAQ:CMLS).

What does smart money think about Cumulus Media Inc (NASDAQ:CMLS)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMLS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is CMLS A Good Stock To Buy?

Among these funds, Brigade Capital held the most valuable stake in Cumulus Media Inc (NASDAQ:CMLS), which was worth $10.5 million at the end of the third quarter. On the second spot was Silver Point Capital which amassed $9.7 million worth of shares. Beach Point Capital Management, AQR Capital Management, and Dalton Investments 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 Beach Point Capital Management allocated the biggest weight to Cumulus Media Inc (NASDAQ:CMLS), around 3.53% of its 13F portfolio. Silver Point Capital is also relatively very bullish on the stock, earmarking 1.14 percent of its 13F equity portfolio to CMLS.

Due to the fact that Cumulus Media Inc (NASDAQ:CMLS) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that decided to sell off their entire stakes by the end of the first quarter. Interestingly, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $4.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $1.5 million worth. These moves are interesting, as total hedge fund interest fell by 5 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 Cumulus Media Inc (NASDAQ:CMLS) but similarly valued. These stocks are Electromed, Inc. (NYSE:ELMD), Express, Inc. (NYSE:EXPR), PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), and Malvern Bancorp, Inc. (NASDAQ:MLVF). All of these stocks’ market caps are closest to CMLS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ELMD 4 2473 3
EXPR 13 37262 1
PHAS 7 7932 -1
MLVF 5 19112 1
Average 7.25 16695 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $27 million in CMLS’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand Electromed, Inc. (NYSE:ELMD) is the least popular one with only 4 bullish hedge fund positions. Cumulus Media Inc (NASDAQ:CMLS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately CMLS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CMLS were disappointed as the stock returned 3.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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