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Hedge Funds Aren’t Done Buying Outfront Media Inc (OUT)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Outfront Media Inc (NYSE:OUT).

Outfront Media Inc (NYSE:OUT) was in 29 hedge funds’ portfolios at the end of the third quarter of 2019. OUT has experienced an increase in support from the world’s most elite money managers lately. There were 22 hedge funds in our database with OUT positions at the end of the previous quarter. Our calculations also showed that OUT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Heebner of Capital Growth Management

Ken Heebner of Capital Growth Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the new hedge fund action regarding Outfront Media Inc (NYSE:OUT).

What does smart money think about Outfront Media Inc (NYSE:OUT)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OUT over the last 17 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.

OUT_dec2019

Among these funds, Select Equity Group held the most valuable stake in Outfront Media Inc (NYSE:OUT), which was worth $118.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $108 million worth of shares. Jericho Capital Asset Management, Echo Street Capital Management, and Land & Buildings Investment Management 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 Land & Buildings Investment Management allocated the biggest weight to Outfront Media Inc (NYSE:OUT), around 6.14% of its portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, setting aside 5.53 percent of its 13F equity portfolio to OUT.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Outfront Media Inc (NYSE:OUT) headfirst. Land & Buildings Investment Management, managed by Jonathan Litt, created the most outsized position in Outfront Media Inc (NYSE:OUT). Land & Buildings Investment Management had $27.8 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $4.2 million position during the quarter. The following funds were also among the new OUT investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Richard Driehaus’s Driehaus Capital, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks similar to Outfront Media Inc (NYSE:OUT). These stocks are Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), The Medicines Company (NASDAQ:MDCO), Helen of Troy Limited (NASDAQ:HELE), and Repligen Corporation (NASDAQ:RGEN). All of these stocks’ market caps are similar to OUT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AJRD 21 465161 3
MDCO 32 1149542 -1
HELE 14 206819 -6
RGEN 23 223018 1
Average 22.5 511135 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $511 million. That figure was $478 million in OUT’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 14 bullish hedge fund positions. Outfront Media Inc (NYSE:OUT) 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 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 OUT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OUT were disappointed as the stock returned -10.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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