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Nexstar Media Group, Inc. (NXST): Are Hedge Funds Right About This Stock?

We can judge whether Nexstar Media Group, Inc. (NASDAQ:NXST) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Nexstar Media Group, Inc. (NASDAQ:NXST) shareholders have witnessed a decrease in enthusiasm from smart money lately. NXST was in 34 hedge funds’ portfolios at the end of September. There were 40 hedge funds in our database with NXST holdings at the end of the previous quarter. Our calculations also showed that NXST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). There are two ETFs with significant positions in NXST right now: ETF Series Solutions – AlphaClone Alternative Alpha ETF (BATS:ALFA) and Goldman Sachs Hedge Industry VIP ETF (NYSE:GVIP).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

Seth Klarman of Baupost Group

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the key hedge fund action regarding Nexstar Media Group, Inc. (NASDAQ:NXST).

How have hedgies been trading Nexstar Media Group, Inc. (NASDAQ:NXST)?

At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NXST over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NXST Positions

The largest stake in Nexstar Media Group, Inc. (NASDAQ:NXST) was held by P2 Capital Partners, which reported holding $211.7 million worth of stock at the end of September. It was followed by Baupost Group with a $204.6 million position. Other investors bullish on the company included Windacre Partnership, Park West Asset Management, and Hound Partners. In terms of the portfolio weights assigned to each position Isomer Partners allocated the biggest weight to Nexstar Media Group, Inc. (NASDAQ:NXST), around 20.65% of its portfolio. P2 Capital Partners is also relatively very bullish on the stock, dishing out 14.3 percent of its 13F equity portfolio to NXST.

Seeing as Nexstar Media Group, Inc. (NASDAQ:NXST) has experienced bearish sentiment from hedge fund managers, we can see that there were a few money managers that elected to cut their full holdings heading into Q4. At the top of the heap, Renaissance Technologies cut the biggest investment of the 750 funds tracked by Insider Monkey, totaling close to $56.4 million in stock. Donald Sussman’s fund, Paloma Partners, also cut its stock, about $8.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nexstar Media Group, Inc. (NASDAQ:NXST) but similarly valued. These stocks are Armstrong World Industries, Inc. (NYSE:AWI), Eastgroup Properties Inc (NYSE:EGP), Black Hills Corporation (NYSE:BKH), and Essent Group Ltd (NYSE:ESNT). All of these stocks’ market caps resemble NXST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AWI 29 505278 -1
EGP 10 24396 -2
BKH 19 186727 3
ESNT 23 301615 -7
Average 20.25 254504 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $1330 million in NXST’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Nexstar Media Group, Inc. (NASDAQ:NXST) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NXST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NXST were disappointed as the stock returned 5.8% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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