Were Hedge Funds Right About Still Being Bullish On Clear Channel Outdoor Holdings (CCO)?

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). 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 Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) investors should pay attention to a decrease in support from the world’s most elite money managers lately. CCO was in 33 hedge funds’ portfolios at the end of March. There were 42 hedge funds in our database with CCO holdings at the end of the previous quarter. Our calculations also showed that CCO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the latest hedge fund action encompassing Clear Channel Outdoor Holdings, Inc. (NYSE:CCO).

Hedge fund activity in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)

Heading into the second quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCO over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Mason Capital Management held the most valuable stake in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), which was worth $19.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $11.3 million worth of shares. Brigade Capital, Rubric Capital Management, and Marathon Asset 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 Mason Capital Management allocated the biggest weight to Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), around 6.19% of its 13F portfolio. Solus Alternative Asset Management is also relatively very bullish on the stock, earmarking 3.87 percent of its 13F equity portfolio to CCO.

Because Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) has experienced a decline in interest from hedge fund managers, logic holds that there were a few hedgies that elected to cut their positions entirely heading into Q4. Interestingly, Victor Khosla’s Strategic Value Partners dumped the largest investment of the 750 funds watched by Insider Monkey, totaling an estimated $17.4 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $3.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 9 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Clear Channel Outdoor Holdings, Inc. (NYSE:CCO). We will take a look at Crossamerica Partners LP (NYSE:CAPL), NI Holdings, Inc. (NASDAQ:NODK), The Manitowoc Company, Inc. (NYSE:MTW), and MetroCity Bankshares, Inc. (NASDAQ:MCBS). This group of stocks’ market caps resemble CCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAPL 1 283 0
NODK 6 21289 -1
MTW 21 43912 4
MCBS 4 3819 0
Average 8 17326 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $83 million in CCO’s case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CCO as the stock returned 62.5% in Q2 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.