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Did Hedge Funds Drop The Ball On Central European Media Enterprises Ltd. (CETV) ?

Reymerlyn Martin

Is Central European Media Enterprises Ltd. (NASDAQ:CETV) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Central European Media Enterprises Ltd. (NASDAQ:CETV) shareholders have witnessed a decrease in support from the world's most elite money managers lately. CETV was in 5 hedge funds' portfolios at the end of December. There were 7 hedge funds in our database with CETV positions at the end of the previous quarter. Our calculations also showed that CETV isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We're going to take a peek at the fresh hedge fund action surrounding Central European Media Enterprises Ltd. (NASDAQ:CETV).

What have hedge funds been doing with Central European Media Enterprises Ltd. (NASDAQ:CETV)?

At Q4's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in CETV a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CETV_may2019

Among these funds, D E Shaw held the most valuable stake in Central European Media Enterprises Ltd. (NASDAQ:CETV), which was worth $1 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $0.2 million worth of shares. Moreover, Citadel Investment Group, PDT Partners, and Springbok Capital were also bullish on Central European Media Enterprises Ltd. (NASDAQ:CETV), allocating a large percentage of their portfolios to this stock.

Seeing as Central European Media Enterprises Ltd. (NASDAQ:CETV) has witnessed a decline in interest from hedge fund managers, we can see that there was a specific group of funds that elected to cut their positions entirely heading into Q3. It's worth mentioning that Jim Simons's Renaissance Technologies sold off the largest investment of the 700 funds followed by Insider Monkey, totaling about $0.2 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also sold off its stock, about $0 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q3.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Central European Media Enterprises Ltd. (NASDAQ:CETV) but similarly valued. These stocks are Stoneridge, Inc. (NYSE:SRI), Community Trust Bancorp, Inc. (NASDAQ:CTBI), American Outdoor Brands Corporation (NASDAQ:AOBC), and FARO Technologies, Inc. (NASDAQ:FARO). All of these stocks' market caps match CETV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRI,15,71331,-3 CTBI,7,16240,-2 AOBC,14,109405,-5 FARO,8,38980,-4 Average,11,58989,-3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $1 million in CETV's case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Community Trust Bancorp, Inc. (NASDAQ:CTBI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Central European Media Enterprises Ltd. (NASDAQ:CETV) is even less popular than CTBI. Hedge funds clearly dropped the ball on CETV as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CETV as the stock returned 46.4% and outperformed the market by an even larger margin.

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

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