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 Tegna Inc (NYSE:TGNA) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in Tegna Inc (NYSE:TGNA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TGNA 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). 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 Brady Corp (NYSE:BRC), Nordstrom, Inc. (NYSE:JWN), and Antero Midstream Corp (NYSE:AM) to gather more data points. Our calculations also showed that TGNA 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.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Parag Vora of HG Vora Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. 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. Now let’s analyze the fresh hedge fund action surrounding Tegna Inc (NYSE:TGNA).
What does smart money think about Tegna Inc (NYSE:TGNA)?
At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in TGNA over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, HG Vora Capital Management was the largest shareholder of Tegna Inc (NYSE:TGNA), with a stake worth $94.7 million reported as of the end of September. Trailing HG Vora Capital Management was Ariel Investments, which amassed a stake valued at $73.2 million. Citadel Investment Group, Fairpointe Capital, and AQR Capital 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 HG Vora Capital Management allocated the biggest weight to Tegna Inc (NYSE:TGNA), around 8.52% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, designating 5.87 percent of its 13F equity portfolio to TGNA.
Because Tegna Inc (NYSE:TGNA) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their entire stakes last quarter. Interestingly, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors said goodbye to the biggest position of the 750 funds followed by Insider Monkey, comprising close to $23.5 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund cut about $6.7 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Tegna Inc (NYSE:TGNA). These stocks are Brady Corp (NYSE:BRC), Nordstrom, Inc. (NYSE:JWN), Antero Midstream Corp (NYSE:AM), Commercial Metals Company (NYSE:CMC), 2U Inc (NASDAQ:TWOU), Franklin Electric Co., Inc. (NASDAQ:FELE), and Weingarten Realty Investors (NYSE:WRI). This group of stocks’ market values resemble TGNA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRC | 17 | 146373 | 7 |
| JWN | 28 | 182227 | 3 |
| AM | 14 | 116661 | 0 |
| CMC | 22 | 153574 | 3 |
| TWOU | 24 | 285907 | 10 |
| FELE | 15 | 176038 | -1 |
| WRI | 19 | 86620 | -1 |
| Average | 19.9 | 163914 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $318 million in TGNA’s case. Nordstrom, Inc. (NYSE:JWN) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Tegna Inc (NYSE:TGNA) is more popular among hedge funds. Our overall hedge fund sentiment score for TGNA is 78.5. 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 returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on TGNA as the stock returned 11.3% since the end of June 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.
