iHeartMedia, Inc. (IHRT) Fell Out Of Favor With Hedge Funds

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards iHeartMedia, Inc. (NASDAQ:IHRT) and determine whether hedge funds skillfully traded this stock.

Is iHeartMedia, Inc. (NASDAQ:IHRT) a buy here? The smart money was selling. The number of bullish hedge fund positions shrunk by 4 recently. iHeartMedia, Inc. (NASDAQ:IHRT) was in 24 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. Our calculations also showed that IHRT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s go over the key hedge fund action regarding iHeartMedia, Inc. (NASDAQ:IHRT).

Hedge fund activity in iHeartMedia, Inc. (NASDAQ:IHRT)

At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IHRT over the last 20 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is IHRT A Good Stock To Buy?

Among these funds, Brigade Capital held the most valuable stake in iHeartMedia, Inc. (NASDAQ:IHRT), which was worth $23.9 million at the end of the third quarter. On the second spot was OZ Management which amassed $22.4 million worth of shares. Contrarian Capital, Mason Capital Management, and Chilton Investment Company were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to iHeartMedia, Inc. (NASDAQ:IHRT), around 5.38% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to IHRT.

Since iHeartMedia, Inc. (NASDAQ:IHRT) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that decided to sell off their full holdings in the second quarter. At the top of the heap, Jeffrey Hoffner’s Engle Capital dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $8 million in stock. Jerome L. Simon’s fund, Lonestar Capital Management, also sold off its stock, about $5.1 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to iHeartMedia, Inc. (NASDAQ:IHRT). These stocks are Stoneridge, Inc. (NYSE:SRI), Brookfield Property REIT Inc. (NASDAQ:BPYU), Golden Ocean Group Ltd (NASDAQ:GOGL), BlackRock Resources & Commodities Strategy Trust (NYSE:BCX), Magic Software Enterprises Ltd. (NASDAQ:MGIC), FinVolution Group (NYSE:FINV), and Berkshire Hills Bancorp, Inc. (NYSE:BHLB). This group of stocks’ market valuations are closest to IHRT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRI 9 47174 -4
BPYU 12 17257 0
GOGL 7 24354 -1
BCX 5 2247 -1
MGIC 3 6801 0
FINV 9 4354 5
BHLB 17 32570 2
Average 8.9 19251 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $112 million in IHRT’s case. Berkshire Hills Bancorp, Inc. (NYSE:BHLB) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks iHeartMedia, Inc. (NASDAQ:IHRT) is more popular among hedge funds. Our overall hedge fund sentiment score for IHRT is 74.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately IHRT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on IHRT were disappointed as the stock returned -5% since the end of the second quarter 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.

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Disclosure: None. This article was originally published at Insider Monkey.