Is OUT A Good Stock To Buy According To Hedge Funds?

Is Outfront Media Inc. (REIT) (NYSE:OUT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is OUT a good stock to buy? Outfront Media Inc. (REIT) (NYSE:OUT) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. OUT investors should pay attention to a decrease in hedge fund sentiment recently. There were 38 hedge funds in our database with OUT holdings at the end of June. Our calculations also showed that OUT 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most investors, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are over 8000 funds trading today, Our experts look at the bigwigs of this club, around 850 funds. Most estimates calculate that this group of people shepherd the majority of all hedge funds’ total capital, and by tracking their best picks, Insider Monkey has deciphered many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year 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 .

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind we’re going to view the recent hedge fund action encompassing Outfront Media Inc. (REIT) (NYSE:OUT).

Do Hedge Funds Think OUT Is A Good Stock To Buy Now?

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in OUT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Palestra Capital Management was the largest shareholder of Outfront Media Inc. (REIT) (NYSE:OUT), with a stake worth $78.6 million reported as of the end of September. Trailing Palestra Capital Management was Eminence Capital, which amassed a stake valued at $72 million. Rima Senvest Management, Southpoint Capital Advisors, and Jericho Capital Asset Management 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 Calixto Global Investors allocated the biggest weight to Outfront Media Inc. (REIT) (NYSE:OUT), around 6.46% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, earmarking 4.53 percent of its 13F equity portfolio to OUT.

Because Outfront Media Inc. (REIT) (NYSE:OUT) has faced a decline in interest from hedge fund managers, we can see that there were a few funds that elected to cut their entire stakes last quarter. At the top of the heap, Mark Moore’s ThornTree Capital Partners said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $4.1 million in stock. Donald Sussman’s fund, Paloma Partners, also cut its stock, about $1.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Outfront Media Inc. (REIT) (NYSE:OUT) but similarly valued. These stocks are Renewable Energy Group Inc (NASDAQ:REGI), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), ESCO Technologies Inc. (NYSE:ESE), Upwork Inc. (NASDAQ:UPWK), First Majestic Silver Corp (NYSE:AG), Kennedy-Wilson Holdings Inc (NYSE:KW), and Brady Corp (NYSE:BRC). This group of stocks’ market caps are closest to OUT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REGI 30 139635 9
TARO 9 59707 -1
ESE 14 74701 7
UPWK 27 294152 2
AG 14 52631 0
KW 18 346851 4
BRC 19 139850 2
Average 18.7 158218 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $572 million in OUT’s case. Renewable Energy Group Inc (NASDAQ:REGI) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Outfront Media Inc. (REIT) (NYSE:OUT) is more popular among hedge funds. Our overall hedge fund sentiment score for OUT is 81.4. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on OUT as the stock returned 37.4% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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