Was The Smart Money Right About ViacomCBS Inc. (VIAC)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards ViacomCBS Inc. (NASDAQ:VIAC).

ViacomCBS Inc. (NASDAQ:VIAC) has experienced a decrease in hedge fund interest of late. ViacomCBS Inc. (NASDAQ:VIAC) was in 71 hedge funds’ portfolios at the end of June. The all time high for this statistic is 89. Our calculations also showed that VIAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV 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 let’s take a gander at the recent hedge fund action encompassing ViacomCBS Inc. (NASDAQ:VIAC).

Do Hedge Funds Think VIAC Is A Good Stock To Buy Now?

At Q2’s end, a total of 71 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards VIAC over the last 24 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Marshall Wace LLP, managed by Paul Marshall and Ian Wace, holds the most valuable position in ViacomCBS Inc. (NASDAQ:VIAC). Marshall Wace LLP has a $208.5 million position in the stock, comprising 1.1% of its 13F portfolio. The second most bullish fund manager is Glenview Capital, led by Larry Robbins, holding a $197.5 million position; 3.3% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Napier Park Global Capital allocated the biggest weight to ViacomCBS Inc. (NASDAQ:VIAC), around 14.76% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, dishing out 4.74 percent of its 13F equity portfolio to VIAC.

Because ViacomCBS Inc. (NASDAQ:VIAC) has faced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings heading into Q3. Intriguingly, George Soros’s Soros Fund Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, valued at about $194.3 million in stock, and Parag Vora’s HG Vora Capital Management was right behind this move, as the fund sold off about $78.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 18 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ViacomCBS Inc. (NASDAQ:VIAC) but similarly valued. These stocks are Occidental Petroleum Corporation (NYSE:OXY), Equifax Inc. (NYSE:EFX), AvalonBay Communities Inc (NYSE:AVB), Arthur J. Gallagher & Co. (NYSE:AJG), Ameriprise Financial, Inc. (NYSE:AMP), EPAM Systems Inc (NYSE:EPAM), and Best Buy Co., Inc. (NYSE:BBY). All of these stocks’ market caps match VIAC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.7 hedge funds with bullish positions and the average amount invested in these stocks was $1475 million. That figure was $1872 million in VIAC’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks ViacomCBS Inc. (NASDAQ:VIAC) is more popular among hedge funds. Our overall hedge fund sentiment score for VIAC is 60.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately VIAC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VIAC were disappointed as the stock returned -19.4% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.

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