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Did Hedge Funds Drop The Ball On Gray Television, Inc. (GTN) ?

Asma UL Husna

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Gray Television, Inc. (NYSE:GTN).

Gray Television, Inc. (NYSE:GTN) shareholders have witnessed a decrease in hedge fund sentiment of late. GTN was in 23 hedge funds' portfolios at the end of September. There were 25 hedge funds in our database with GTN positions at the end of the previous quarter. Our calculations also showed that GTN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are dozens of methods investors have at their disposal to grade publicly traded companies. A duo of the most under-the-radar methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can trounce the market by a very impressive margin (see the details here).

[caption id="attachment_26564" align="aligncenter" width="511"] Leon Cooperman of Omega Advisors[/caption]

OMEGA ADVISORS

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the new hedge fund action encompassing Gray Television, Inc. (NYSE:GTN).

What have hedge funds been doing with Gray Television, Inc. (NYSE:GTN)?

At Q3's end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GTN over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Gray Television, Inc. (NYSE:GTN) was held by Darsana Capital Partners, which reported holding $146.9 million worth of stock at the end of September. It was followed by Omega Advisors with a $8.2 million position. Other investors bullish on the company included GAMCO Investors, Arrowstreet Capital, and Skylands Capital. In terms of the portfolio weights assigned to each position Meghalaya Partners allocated the biggest weight to Gray Television, Inc. (NYSE:GTN), around 6.75% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, setting aside 5.44 percent of its 13F equity portfolio to GTN.

Judging by the fact that Gray Television, Inc. (NYSE:GTN) has experienced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few funds who sold off their full holdings by the end of the third quarter. At the top of the heap, Renaissance Technologies dumped the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $12.2 million in stock, and Lee Ainslie's Maverick Capital was right behind this move, as the fund dropped about $4.1 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Gray Television, Inc. (NYSE:GTN) but similarly valued. We will take a look at Livongo Health, Inc. (NASDAQ:LVGO), Heartland Financial USA Inc (NASDAQ:HTLF), NIO Limited (NYSE:NIO), and Bloomin' Brands Inc (NASDAQ:BLMN). This group of stocks' market caps resemble GTN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LVGO,15,48907,15 HTLF,9,24829,1 NIO,13,31011,-1 BLMN,18,250574,-4 Average,13.75,88830,2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $206 million in GTN's case. Bloomin' Brands Inc (NASDAQ:BLMN) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Gray Television, Inc. (NYSE:GTN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GTN as the stock returned 24% during the first two months of Q4 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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