What Do Hedge Funds Think of The Madison Square Garden Co (MSG)?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in The Madison Square Garden Co (NYSE:MSG).

Is The Madison Square Garden Co (NYSE:MSG) undervalued? Money managers are getting less optimistic. The number of long hedge fund bets fell by 16 in recent months. MSG was in 24 hedge funds’ portfolios at the end of the third quarter of 2015. There were 40 hedge funds in our database with MSG positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Lions Gate Entertainment Corp. (USA) (NYSE:LGF), Lazard Ltd (NYSE:LAZ), and OGE Energy Corp. (NYSE:OGE) to gather more data points.

With all of this in mind, let’s go over the recent action regarding The Madison Square Garden Co (NYSE:MSG).

What have hedge funds been doing with The Madison Square Garden Co (NYSE:MSG)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mason Capital Management, managed by Kenneth Mario Garschina, holds the biggest position in The Madison Square Garden Co (NYSE:MSG). Mason Capital Management has a $316.3 million position in the stock, comprising 6.7% of its 13F portfolio. Sitting at the No. 2 spot is Mario Gabelli of GAMCO Investors, with a $187.1 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass D E Shaw, Christian Leone’s Luxor Capital Group and Dmitry Balyasny’s Balyasny Asset Management.

Since The Madison Square Garden Co (NASDAQ:MSG) has experienced a declination in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Anand Desai’s Darsana Capital Partners said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $69.5 million in stock. Rob Citrone’s fund, Discovery Capital Management, also dropped its stock, about $58.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 16 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Madison Square Garden Co (NYSE:MSG) but similarly valued. These stocks are Lions Gate Entertainment Corp. (USA) (NYSE:LGF), Lazard Ltd (NYSE:LAZ), OGE Energy Corp. (NYSE:OGE), and 58.com Inc (ADR) (NYSE:WUBA). This group of stocks’ market values match MSG’s market value.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $955 million. That figure was $1007 million in MSG’s case. Lions Gate Entertainment Corp. (USA) (NYSE:LGF) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 22 bullish hedge fund positions. The Madison Square Garden Co (NYSE:MSG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LGF might be a better candidate to consider a long position.