Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Cumulus Media Inc (NASDAQ:CMLS)? The smart money sentiment can provide an answer to this question.
Is CMLS a good stock to buy now? The smart money was getting less optimistic. The number of long hedge fund bets decreased by 4 in recent months. Cumulus Media Inc (NASDAQ:CMLS) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 21. Our calculations also showed that CMLS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with CMLS positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are over 8000 funds trading at present, Our experts choose to focus on the upper echelon of this group, around 850 funds. These investment experts oversee bulk of all hedge funds’ total asset base, and by keeping track of their first-class investments, Insider Monkey has spotted various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Now let’s review the recent hedge fund action regarding Cumulus Media Inc (NASDAQ:CMLS).
What have hedge funds been doing with Cumulus Media Inc (NASDAQ:CMLS)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in CMLS 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.
The largest stake in Cumulus Media Inc (NASDAQ:CMLS) was held by Brigade Capital, which reported holding $10.4 million worth of stock at the end of September. It was followed by Silver Point Capital with a $9.6 million position. Other investors bullish on the company included Beach Point Capital Management, Millennium Management, and Dalton Investments. In terms of the portfolio weights assigned to each position Silver Point Capital allocated the biggest weight to Cumulus Media Inc (NASDAQ:CMLS), around 1.17% of its 13F portfolio. Beach Point Capital Management is also relatively very bullish on the stock, setting aside 0.89 percent of its 13F equity portfolio to CMLS.
Because Cumulus Media Inc (NASDAQ:CMLS) has experienced declining sentiment from the smart money, we can see that there is a sect of hedge funds who were dropping their positions entirely heading into Q4. Intriguingly, Cliff Asness’s AQR Capital Management said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, comprising about $1.4 million in stock, and Jody LaNasa’s Serengeti Asset Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Cumulus Media Inc (NASDAQ:CMLS). We will take a look at IntriCon Corporation (NASDAQ:IIN), Palatin Technologies, Inc. (NYSE:PTN), Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS), C&F Financial Corp (NASDAQ:CFFI), Clipper Realty Inc. (NYSE:CLPR), Everspin Technologies, Inc. (NASDAQ:MRAM), and Alaska Communications Systems Group Inc (NASDAQ:ALSK). This group of stocks’ market values are similar to CMLS’s market value.
|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 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $24 million in CMLS’s case. Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) is the most popular stock in this table. On the other hand C&F Financial Corp (NASDAQ:CFFI) is the least popular one with only 2 bullish hedge fund positions. Cumulus Media Inc (NASDAQ:CMLS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMLS is 30.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on CMLS as the stock returned 59.6% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.