At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ViacomCBS Inc. (NASDAQ:VIAC) at the end of the second quarter and determine whether the smart money was really smart about this stock.
ViacomCBS Inc. (NASDAQ:VIAC) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 64. VIAC shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 54 hedge funds in our database with VIAC holdings at the end of March. Our calculations also showed that VIAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
To most investors, hedge funds are viewed as worthless, old financial tools of years past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the top tier of this group, about 850 funds. These investment experts direct the lion’s share of the smart money’s total asset base, and by shadowing their unrivaled equity investments, Insider Monkey has discovered a number of investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed 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 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s take a peek at the fresh hedge fund action encompassing ViacomCBS Inc. (NASDAQ:VIAC).
What does smart money think about ViacomCBS Inc. (NASDAQ:VIAC)?
Heading into the third quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 41 hedge funds with a bullish position in VIAC a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Baupost Group held the most valuable stake in ViacomCBS Inc. (NASDAQ:VIAC), which was worth $439.3 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $141.2 million worth of shares. Glenview Capital, Contrarius Investment Management, and Canyon Capital Advisors 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 Contrarius Investment Management allocated the biggest weight to ViacomCBS Inc. (NASDAQ:VIAC), around 7.23% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, dishing out 6.45 percent of its 13F equity portfolio to VIAC.
Judging by the fact that ViacomCBS Inc. (NASDAQ:VIAC) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers who sold off their full holdings heading into Q3. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of all the hedgies followed by Insider Monkey, valued at about $28.1 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also said goodbye to its stock, about $10.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 9 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to ViacomCBS Inc. (NASDAQ:VIAC). These stocks are GSX Techedu Inc. (NYSE:GSX), Zscaler, Inc. (NASDAQ:ZS), Kansas City Southern (NYSE:KSU), Jack Henry & Associates, Inc. (NASDAQ:JKHY), Roku, Inc. (NASDAQ:ROKU), Boston Properties, Inc. (NYSE:BXP), and EPAM Systems Inc (NYSE:EPAM). This group of stocks’ market values are similar to VIAC’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 33 hedge funds with bullish positions and the average amount invested in these stocks was $428 million. That figure was $1153 million in VIAC’s case. Kansas City Southern (NYSE:KSU) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 13 bullish hedge fund positions. ViacomCBS Inc. (NASDAQ:VIAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIAC is 64.2. 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 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on VIAC as the stock returned 19.4% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.