Hedge Funds Are Turning Off Gray Television, Inc. (GTN)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gray Television, Inc. (NYSE:GTN).

Is Gray Television, Inc. (NYSE:GTN) a cheap investment now? Money managers are becoming less confident. The number of long hedge fund bets shrunk by 3 lately. 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Clint Carlson of Carlson Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action regarding Gray Television, Inc. (NYSE:GTN).

How are hedge funds trading Gray Television, Inc. (NYSE:GTN)?

At the end of the first quarter, 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. Below, you can check out the change in hedge fund sentiment towards GTN over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Darsana Capital Partners was the largest shareholder of Gray Television, Inc. (NYSE:GTN), with a stake worth $85.9 million reported as of the end of September. Trailing Darsana Capital Partners was Alden Global Capital, which amassed a stake valued at $10.6 million. Carlson Capital, Omega Advisors, and GAMCO Investors 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 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, earmarking 4.06 percent of its 13F equity portfolio to GTN.

Since Gray Television, Inc. (NYSE:GTN) has experienced falling interest from hedge fund managers, we can see that there exists a select few funds that slashed their full holdings in the first quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $3.2 million in stock, and Amir Mokari’s Emerson Point Capital was right behind this move, as the fund dropped about $2.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Gray Television, Inc. (NYSE:GTN). These stocks are Myriad Genetics, Inc. (NASDAQ:MYGN), United States Steel Corporation (NYSE:X), Kaman Corporation (NYSE:KAMN), and IAMGOLD Corporation (NYSE:IAG). This group of stocks’ market caps are similar 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on GTN as the stock returned 34.7% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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