Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Outfront Media Inc (NYSE:OUT).
Is Outfront Media Inc (NYSE:OUT) a buy, sell, or hold? Investors who are in the know are turning less bullish. The number of long hedge fund bets dropped by 2 lately. Our calculations also showed that OUT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Ubben of ValueAct Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the latest hedge fund action regarding Outfront Media Inc (NYSE:OUT).
How have hedgies been trading Outfront Media Inc (NYSE:OUT)?
At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in OUT a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in Outfront Media Inc (NYSE:OUT). Select Equity Group has a $134.9 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $111.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism consist of Jonathan Litt’s Land & Buildings Investment Management, Israel Englander’s Millennium Management and Greg Poole’s Echo Street Capital Management. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Outfront Media Inc (NYSE:OUT), around 7.7% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, designating 6.35 percent of its 13F equity portfolio to OUT.
Due to the fact that Outfront Media Inc (NYSE:OUT) has faced bearish sentiment from the smart money, we can see that there exists a select few fund managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Josh Resnick’s Jericho Capital Asset Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth about $96.9 million in stock. Ken Heebner’s fund, Capital Growth Management, also cut its stock, about $4.2 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Outfront Media Inc (NYSE:OUT) but similarly valued. These stocks are Chimera Investment Corporation (NYSE:CIM), Mercury Systems Inc (NASDAQ:MRCY), Aaron’s, Inc. (NYSE:AAN), and Compania de Minas Buenaventura S.A.A. (NYSE:BVN). This group of stocks’ market valuations resemble OUT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIM | 14 | 123344 | 1 |
| MRCY | 24 | 50633 | 2 |
| AAN | 32 | 368602 | 14 |
| BVN | 13 | 141024 | 5 |
| Average | 20.75 | 170901 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $487 million in OUT’s case. Aaron’s, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura S.A.A. (NYSE:BVN) is the least popular one with only 13 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 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 -51.2% during the same time period 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
