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Did Hedge Funds Drop The Ball On The New York Times Company (NYT) ?

Reymerlyn Martin

Before we spend countless hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so 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 The New York Times Company (NYSE:NYT).

The New York Times Company (NYSE:NYT) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2018. NYT has experienced a decrease in activity from the world's largest hedge funds lately. There were 34 hedge funds in our database with NYT holdings at the end of the previous quarter. Our calculations also showed that NYT isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Gil Simon of SoMa Equity Partners

We're going to take a gander at the latest hedge fund action regarding The New York Times Company (NYSE:NYT).

What does the smart money think about The New York Times Company (NYSE:NYT)?

At Q4's end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in NYT a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

NYT_apr2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Anand Desai's Darsana Capital Partners has the number one position in The New York Times Company (NYSE:NYT), worth close to $285 million, accounting for 11.9% of its total 13F portfolio. The second most bullish fund manager is OZ Management, managed by Daniel S. Och, which holds a $136.7 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions consist of Gil Simon's SoMa Equity Partners, David Greenspan's Slate Path Capital and Charles Lemonides's Valueworks LLC.

Since The New York Times Company (NYSE:NYT) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds who were dropping their positions entirely by the end of the third quarter. It's worth mentioning that James H. Litinsky's JHL Capital Group dumped the largest position of the "upper crust" of funds watched by Insider Monkey, valued at about $28.9 million in stock, and Bain Capital's Brookside Capital was right behind this move, as the fund sold off about $21 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks similar to The New York Times Company (NYSE:NYT). These stocks are Telephone & Data Systems, Inc. (NYSE:TDS), Shell Midstream Partners LP (NYSE:SHLX), Alteryx, Inc. (NYSE:AYX), and Equity Commonwealth (NYSE:EQC). This group of stocks' market values match NYT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDS,22,433911,2 SHLX,8,25882,2 AYX,29,526112,3 EQC,17,212173,0 Average,19,299520,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $300 million. That figure was $821 million in NYT's case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks The New York Times Company (NYSE:NYT) is more popular among hedge funds. 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. Hedge funds were also right about betting on NYT as the stock returned 48.3% 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.

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

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