How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The New York Times Company (NYSE:NYT).
Is The New York Times Company (NYSE:NYT) undervalued? Hedge funds were getting more optimistic. The number of bullish hedge fund bets moved up by 5 in recent months. The New York Times Company (NYSE:NYT) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NYT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the fresh hedge fund action regarding The New York Times Company (NYSE:NYT).
Do Hedge Funds Think NYT Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NYT over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Darsana Capital Partners, managed by Anand Desai, holds the biggest position in The New York Times Company (NYSE:NYT). Darsana Capital Partners has a $517.7 million position in the stock, comprising 14.6% of its 13F portfolio. The second most bullish fund manager is Farallon Capital, which holds a $338.9 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Daniel Sundheim’s D1 Capital Partners, Renaissance Technologies and William Duhamel’s Route One Investment Company. In terms of the portfolio weights assigned to each position Anabranch Capital allocated the biggest weight to The New York Times Company (NYSE:NYT), around 21.03% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, setting aside 14.61 percent of its 13F equity portfolio to NYT.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Anabranch Capital, managed by Alexander Shapiro, initiated the biggest position in The New York Times Company (NYSE:NYT). Anabranch Capital had $34.2 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also initiated a $26.6 million position during the quarter. The other funds with new positions in the stock are Brennan Diaz’s Fernbridge Capital Management, Sharlyn C. Heslam’s Stockbridge Partners, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The New York Times Company (NYSE:NYT) but similarly valued. We will take a look at Tapestry, Inc. (NYSE:TPR), Globant SA (NYSE:GLOB), Alleghany Corporation (NYSE:Y), Dada Nexus Limited (NASDAQ:DADA), AGNC Investment Corp. (NASDAQ:AGNC), Hubbell Incorporated (NYSE:HUBB), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). This group of stocks’ market values resemble NYT’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 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $853 million. That figure was $2750 million in NYT’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks The New York Times Company (NYSE:NYT) is more popular among hedge funds. Our overall hedge fund sentiment score for NYT is 90. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately NYT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NYT were disappointed as the stock returned -12.1% since the end of the fourth quarter (through 4/30) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.