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Was The Smart Money Right About MSG Networks Inc (MSGN)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The following article will discuss the smart money sentiment towards MSG Networks Inc (NYSE:MSGN).

MSG Networks Inc (NYSE:MSGN) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2019. MSGN shareholders have witnessed a decrease in hedge fund sentiment of late. There were 34 hedge funds in our database with MSGN holdings at the end of the previous quarter. Our calculations also showed that MSGN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

According to most investors, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open at present, We choose to focus on the upper echelon of this club, approximately 850 funds. Most estimates calculate that this group of people orchestrate the lion’s share of the hedge fund industry’s total asset base, and by shadowing their finest picks, Insider Monkey has spotted many investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Michael Platt Bluecrest Capital Management

Michael Platt of BlueCrest Capital Mgmt.

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 latest hedge fund action regarding MSG Networks Inc (NYSE:MSGN).

What have hedge funds been doing with MSG Networks Inc (NYSE:MSGN)?

At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the third quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in MSGN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Ariel Investments held the most valuable stake in MSG Networks Inc (NYSE:MSGN), which was worth $151.8 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $34.3 million worth of shares. Contrarius Investment Management, Arrowstreet Capital, and Renaissance Technologies 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 Solas Capital Management allocated the biggest weight to MSG Networks Inc (NYSE:MSGN), around 5.11% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 1.91 percent of its 13F equity portfolio to MSGN.

Because MSG Networks Inc (NYSE:MSGN) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their full holdings last quarter. Intriguingly, Bernard Selz’s Selz Capital cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $8.7 million in stock. Andrew Hahn’s fund, Ursa Fund Management, also said goodbye to its stock, about $4.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 6 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to MSG Networks Inc (NYSE:MSGN). These stocks are Nabors Industries Ltd. (NYSE:NBR), Bitauto Hldg Ltd (NYSE:BITA), AK Steel Holding Corporation (NYSE:AKS), and John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). This group of stocks’ market values match MSGN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBR 21 148138 1
BITA 15 127794 1
AKS 11 36663 -3
JBSS 17 66509 0
Average 16 94776 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $305 million in MSGN’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand AK Steel Holding Corporation (NYSE:AKS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks MSG Networks Inc (NYSE:MSGN) 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 gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately MSGN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MSGN were disappointed as the stock returned -33.8% during the four months of 2020 (through May 1st) 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 in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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