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Nexstar Media Group, Inc. (NXST): Hedge Funds Aren’t Worried

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Nexstar Media Group, Inc. (NASDAQ:NXST) based on those filings.

Nexstar Media Group, Inc. (NASDAQ:NXST) has experienced an increase in hedge fund interest of late. NXST was in 41 hedge funds’ portfolios at the end of March. 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 Q1 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.

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 S&P 500 ETFs by more than 44 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 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 stocks that are in our short portfolio.

BAUPOST GROUP Seth Klarman

Seth Klarman of Baupost Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action surrounding Nexstar Media Group, Inc. (NASDAQ:NXST).

What does smart money think about Nexstar Media Group, Inc. (NASDAQ:NXST)?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in NXST 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 Nexstar Media Group, Inc. (NASDAQ:NXST) was held by Baupost Group, which reported holding $120.4 million worth of stock at the end of September. It was followed by P2 Capital Partners with a $98.2 million position. Other investors bullish on the company included Park West Asset Management, Hound Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Isomer Partners allocated the biggest weight to Nexstar Media Group, Inc. (NASDAQ:NXST), around 15.46% of its 13F portfolio. Billings Capital Management is also relatively very bullish on the stock, setting aside 13.63 percent of its 13F equity portfolio to NXST.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Nexstar Media Group, Inc. (NASDAQ:NXST) headfirst. Alden Global Capital, managed by Randall Smith, created the largest position in Nexstar Media Group, Inc. (NASDAQ:NXST). Alden Global Capital had $15.1 million invested in the company at the end of the quarter. Edward Goodnow’s Goodnow Investment Group also initiated a $7.4 million position during the quarter. The other funds with brand new NXST positions are Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, Eric F. Billings’s Billings Capital Management, and Ian Simm’s Impax Asset Management.

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. We will take a look at Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), Medpace Holdings, Inc. (NASDAQ:MEDP), Ultrapar Participacoes SA (NYSE:UGP), and Braskem SA (NYSE:BAK). This group of stocks’ market values are closest to NXST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHI 3 11620 0
MEDP 17 183270 0
UGP 5 25895 0
BAK 6 23630 1
Average 7.75 61104 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $663 million in NXST’s case. Medpace Holdings, Inc. (NASDAQ:MEDP) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 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 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on NXST as the stock returned 45.5% so far in Q2 (through the end of May) 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.

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