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Hedge Funds Are Starting To Warm Up To Tegna Inc (TGNA)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Tegna Inc (NYSE:TGNA).

Tegna Inc (NYSE:TGNA) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that TGNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the latest hedge fund action encompassing Tegna Inc (NYSE:TGNA).

How are hedge funds trading Tegna Inc (NYSE:TGNA)?

Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the second quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in TGNA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, AQR Capital Management was the largest shareholder of Tegna Inc (NYSE:TGNA), with a stake worth $150.4 million reported as of the end of September. Trailing AQR Capital Management was Ariel Investments, which amassed a stake valued at $97.6 million. Diamond Hill Capital, Arrowstreet Capital, and Cove Street 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 Alden Global Capital allocated the biggest weight to Tegna Inc (NYSE:TGNA), around 5.9% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to TGNA.

As one would reasonably expect, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, created the most outsized position in Tegna Inc (NYSE:TGNA). Holocene Advisors had $2 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also initiated a $1.2 million position during the quarter. The other funds with brand new TGNA positions are Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tegna Inc (NYSE:TGNA) but similarly valued. We will take a look at Terreno Realty Corporation (NYSE:TRNO), Globant SA (NYSE:GLOB), Sanderson Farms, Inc. (NASDAQ:SAFM), and The Goodyear Tire & Rubber Company (NASDAQ:GT). This group of stocks’ market valuations match TGNA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRNO 10 51158 1
GLOB 16 70256 2
SAFM 23 410866 3
GT 27 632153 -3
Average 19 291108 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $359 million in TGNA’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Tegna Inc (NYSE:TGNA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TGNA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TGNA investors were disappointed as the stock returned -1.2% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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