Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Tribune Media Company (NYSE:TRCO).
Tribune Media Company (NYSE:TRCO) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2018. TRCO has seen an increase in activity from the world’s largest hedge funds lately. There were 39 hedge funds in our database with TRCO holdings at the end of the previous quarter. Our calculations also showed that TRCO isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the fresh hedge fund action encompassing Tribune Media Company (NYSE:TRCO).
Hedge fund activity in Tribune Media Company (NYSE:TRCO)
At Q4’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the second quarter of 2018. On the other hand, there were a total of 30 hedge funds with a bullish position in TRCO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the largest position in Tribune Media Company (NYSE:TRCO), worth close to $217.3 million, comprising 5.3% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, led by Mario Gabelli, holding a $136.2 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, Jim Simons’s Renaissance Technologies and Clint Carlson’s Carlson Capital.
Now, specific money managers have been driving this bullishness. Magnetar Capital, managed by Alec Litowitz and Ross Laser, established the most outsized position in Tribune Media Company (NYSE:TRCO). Magnetar Capital had $217.3 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $94.7 million position during the quarter. The following funds were also among the new TRCO investors: Carl Tiedemann and Michael Tiedemann’s TIG Advisors, John Bader’s Halcyon Asset Management, and John Paulson’s Paulson & Co.
Let’s now review hedge fund activity in other stocks similar to Tribune Media Company (NYSE:TRCO). These stocks are Spirit Airlines Incorporated (NYSE:SAVE), Entegris Inc (NASDAQ:ENTG), Landstar System, Inc. (NASDAQ:LSTR), and FibroGen Inc (NASDAQ:FGEN). This group of stocks’ market caps resemble TRCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAVE | 30 | 518075 | 10 |
| ENTG | 18 | 423363 | -7 |
| LSTR | 23 | 202014 | -5 |
| FGEN | 20 | 221726 | 3 |
| Average | 22.75 | 341295 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $1421 million in TRCO’s case. Spirit Airlines Incorporated (NYSE:SAVE) is the most popular stock in this table. On the other hand Entegris Inc (NASDAQ:ENTG) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Tribune Media Company (NYSE:TRCO) is more popular among hedge funds. 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. Unfortunately TRCO wasn’t nearly as popular as these 15 stock and hedge funds that were betting on TRCO were disappointed as the stock returned 2.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
