In this article you are going to find out whether hedge funds think Salem Media Group, Inc. (NASDAQ:SALM) 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.
Hedge fund interest in Salem Media Group, Inc. (NASDAQ:SALM) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Lipocine Inc (NASDAQ:LPCN), SandRidge Permian Trust (NYSE:PER), and Remark Holdings, Inc. (NASDAQ:MARK) to gather more data points. Our calculations also showed that SALM 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 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 51 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.
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 stocks recommended/scorned by legendary Bill Miller. 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 let’s take a gander at the key hedge fund action encompassing Salem Media Group, Inc. (NASDAQ:SALM).
What have hedge funds been doing with Salem Media Group, Inc. (NASDAQ:SALM)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in SALM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in Salem Media Group, Inc. (NASDAQ:SALM), worth close to $0.4 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Frederick DiSanto’s Ancora Advisors, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Salem Media Group, Inc. (NASDAQ:SALM), around 0.01% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.0031 percent of its 13F equity portfolio to SALM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Salem Media Group, Inc. (NASDAQ:SALM) but similarly valued. These stocks are Lipocine Inc (NASDAQ:LPCN), SandRidge Permian Trust (NYSE:PER), Remark Holdings, Inc. (NASDAQ:MARK), and Unique Fabricating Inc (NYSE:UFAB). This group of stocks’ market caps resemble SALM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in SALM’s case. Lipocine Inc (NASDAQ:LPCN) is the most popular stock in this table. On the other hand SandRidge Permian Trust (NYSE:PER) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Salem Media Group, Inc. (NASDAQ:SALM) 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 gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately SALM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SALM were disappointed as the stock returned 4.6% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.