Were These Hedge Funds Wrong About Loading Up On Outfront Media (OUT)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Outfront Media Inc. (REIT) (NYSE:OUT).

Is Outfront Media Inc. (REIT) (NYSE:OUT) a good stock to buy now? Prominent investors were becoming more confident. The number of bullish hedge fund positions moved up by 8 lately. Outfront Media Inc (NYSE:OUT) was in 38 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OUT 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 - HG Vora Capital

Parag Vora of HG Vora Capital Management

At Insider Monkey we scour multiple sources to uncover 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 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. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s go over the key hedge fund action regarding Outfront Media Inc. (REIT) (NYSE:OUT).

What have hedge funds been doing with Outfront Media Inc. (REIT) (NYSE:OUT)?

At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in OUT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Outfront Media Inc. (REIT) (NYSE:OUT) was held by Eminence Capital, which reported holding $89.7 million worth of stock at the end of June. It was followed by Rima Senvest Management with a $54.6 million position. Other investors bullish on the company included Jericho Capital Asset Management, Citadel Investment Group, and HG Vora Capital Management. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to Outfront Media Inc. (REIT) (NYSE:OUT), around 5.62% of its 13F portfolio. Calixto Global Investors is also relatively very bullish on the stock, setting aside 4.56 percent of its 13F equity portfolio to OUT.

As one would reasonably expect, some big names were leading the bulls’ herd. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in Outfront Media Inc. (REIT) (NYSE:OUT). Jericho Capital Asset Management had $53.6 million invested in the company at the end of the quarter. Parag Vora’s HG Vora Capital Management also made a $35.4 million investment in the stock during the quarter. The other funds with brand new OUT positions are David Rosen’s Rubric Capital Management, Jonathan Litt’s Land & Buildings Investment Management, and Sander Gerber’s Hudson Bay Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Outfront Media Inc. (REIT) (NYSE:OUT) but similarly valued. These stocks are Tower Semiconductor Ltd. (NASDAQ:TSEM), Worthington Industries, Inc. (NYSE:WOR), CIT Group Inc. (NYSE:CIT), Enable Midstream Partners LP (NYSE:ENBL), Washington Federal Inc. (NASDAQ:WAFD), Arcosa, Inc. (NYSE:ACA), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market caps are similar to OUT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSEM 15 312269 4
WOR 21 77248 7
CIT 27 320526 -10
ENBL 5 11040 -1
WAFD 14 34823 -4
ACA 16 156074 -1
COLB 9 85368 -3
Average 15.3 142478 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $470 million in OUT’s case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Outfront Media Inc. (REIT) (NYSE:OUT) is more popular among hedge funds. Our overall hedge fund sentiment score for OUT 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Unfortunately OUT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OUT were disappointed as the stock returned -7.5% since the end of the second quarter (through 10/30) 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 in 2020.

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