Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s take a look at the latest hedge fund action encompassing The E.W. Scripps Company (NASDAQ:SSP).
What have hedge funds been doing with The E.W. Scripps Company (NASDAQ:SSP)?
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SSP over the last 14 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in The E.W. Scripps Company (NASDAQ:SSP) was held by GAMCO Investors, which reported holding $116.4 million worth of stock at the end of December. It was followed by Cove Street Capital with a $30.8 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Royce & Associates.
Consequently, key money managers were leading the bulls’ herd. Deep Field Asset Management, managed by Jordan Moelis and Jeff Farroni, assembled the largest position in The E.W. Scripps Company (NASDAQ:SSP). Deep Field Asset Management had $1.9 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Jim Simons’s Renaissance Technologies, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks similar to The E.W. Scripps Company (NASDAQ:SSP). We will take a look at Delphi Technologies PLC (NYSE:DLPH), Cambrex Corporation (NYSE:CBM), Contura Energy, Inc. (NYSE:CTRA), and Shutterstock Inc (NYSE:SSTK). All of these stocks’ market caps match SSP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $169 million in SSP’s case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand Cambrex Corporation (NYSE:CBM) is the least popular one with only 13 bullish hedge fund positions. The E.W. Scripps Company (NASDAQ:SSP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SSP as the stock returned 40.8% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.