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Saga Communications, Inc. (SGA): Are Hedge Funds Right About This Stock?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Saga Communications, Inc. (NYSE:SGA).

Hedge fund interest in Saga Communications, Inc. (NYSE:SGA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Plymouth Industrial REIT, Inc. (NYSE:PLYM), CECO Environmental Corp. (NASDAQ:CECE), and Griffin Land & Nurseries, Inc. (NASDAQ:GRIF) to gather more data points. Our calculations also showed that SGA 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.

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the recent hedge fund action encompassing Saga Communications, Inc. (NYSE:SGA).

How are hedge funds trading Saga Communications, Inc. (NYSE:SGA)?

Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SGA over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SGA A Good Stock To Buy?

Among these funds, Royce & Associates held the most valuable stake in Saga Communications, Inc. (NYSE:SGA), which was worth $7.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.8 million worth of shares. Minerva Advisors was 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 Minerva Advisors allocated the biggest weight to Saga Communications, Inc. (NYSE:SGA), around 3.03% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to SGA.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks similar to Saga Communications, Inc. (NYSE:SGA). We will take a look at Plymouth Industrial REIT, Inc. (NYSE:PLYM), CECO Environmental Corp. (NASDAQ:CECE), Griffin Land & Nurseries, Inc. (NASDAQ:GRIF), and SmartPros Ltd. (NASDAQ:SPRO). This group of stocks’ market caps match SGA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLYM 9 15292 0
CECE 7 29575 -2
GRIF 4 25050 1
SPRO 7 27260 0
Average 6.75 24294 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $16 million in SGA’s case. Plymouth Industrial REIT, Inc. (NYSE:PLYM) is the most popular stock in this table. On the other hand Griffin Land & Nurseries, Inc. (NASDAQ:GRIF) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Saga Communications, Inc. (NYSE:SGA) is even less popular than GRIF. Hedge funds dodged a bullet by taking a bearish stance towards SGA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately SGA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SGA investors were disappointed as the stock returned -6.9% during the second quarter (through May 22nd) 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 so far in 2020.

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