Hedge Funds Got Back Into Gannett Co., Inc. (NYSE:GCI) At The Wrong Time

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Gannett Co., Inc. (NYSE:GCI) makes for a good investment right now.

Gannett Co., Inc. (NYSE:GCI) has experienced an increase in hedge fund sentiment recently. GCI was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. There were 14 hedge funds in our database with GCI positions at the end of the previous quarter. Our calculations also showed that GCI 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’ 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.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s view the new hedge fund action regarding Gannett Co., Inc. (NYSE:GCI).

What have hedge funds been doing with Gannett Co., Inc. (NYSE:GCI)?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in GCI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GCI A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Robert Emil Zoellner’s Alpine Associates has the biggest position in Gannett Co., Inc. (NYSE:GCI), worth close to $47.7 million, corresponding to 1.6% of its total 13F portfolio. The second largest stake is held by Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $46.7 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Jeremy Carton and Gilbert Li’s Alta Fundamental Advisers, Parvinder Thiara’s Athanor Capital and John Orrico’s Water Island Capital. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Gannett Co., Inc. (NYSE:GCI), around 19.84% of its 13F portfolio. Alpine Associates is also relatively very bullish on the stock, designating 1.56 percent of its 13F equity portfolio to GCI.

Consequently, specific money managers were breaking ground themselves. Alpine Associates, managed by Robert Emil Zoellner, assembled the most valuable position in Gannett Co., Inc. (NYSE:GCI). Alpine Associates had $47.7 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $46.7 million position during the quarter. The other funds with brand new GCI positions are Parvinder Thiara’s Athanor Capital, John Orrico’s Water Island Capital, and Leon Cooperman’s Omega Advisors.

Let’s go over hedge fund activity in other stocks similar to Gannett Co., Inc. (NYSE:GCI). We will take a look at Medifast, Inc. (NYSE:MED), Futu Holdings Limited (NASDAQ:FHL), Tompkins Financial Corporation (NYSE:TMP), and The Chefs Warehouse, Inc (NASDAQ:CHEF). This group of stocks’ market values resemble GCI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MED 22 302026 3
FHL 1 538 -2
TMP 6 20124 1
CHEF 9 58847 0
Average 9.5 95384 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $169 million in GCI’s case. Medifast, Inc. (NYSE:MED) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FHL) is the least popular one with only 1 bullish hedge fund positions. Gannett Co., Inc. (NYSE:GCI) 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 GCI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GCI were disappointed as the stock returned -39.9% 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.