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How Did The New York Times Company (NYT) Perform In Comparison to Hedge Fund Favorites in 2019?

Reymerlyn Martin

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.3% in 2019 and outperformed the broader market benchmark by 10.1 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

The New York Times Company (NYSE:NYT) shareholders have witnessed a decrease in hedge fund sentiment lately. NYT was in 37 hedge funds' portfolios at the end of September. There were 41 hedge funds in our database with NYT positions at the end of the second quarter. Our calculations also showed that NYT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the eyes of most market participants, hedge funds are assumed to be unimportant, old investment vehicles of the past. While there are over 8000 funds with their doors open at the moment, Our researchers choose to focus on the aristocrats of this club, approximately 750 funds. Most estimates calculate that this group of people administer most of the smart money's total capital, and by watching their first-class equity investments, Insider Monkey has found a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_674067" align="aligncenter" width="1680"] Gil Simon of SoMa Equity Partners[/caption]

Gil Simon of SoMa Equity Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now we're going to take a look at the fresh hedge fund action surrounding The New York Times Company (NYSE:NYT).

How have hedgies been trading The New York Times Company (NYSE:NYT)?

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NYT over the last 17 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

More specifically, Darsana Capital Partners was the largest shareholder of The New York Times Company (NYSE:NYT), with a stake worth $299 million reported as of the end of September. Trailing Darsana Capital Partners was Sculptor Capital, which amassed a stake valued at $164.4 million. Renaissance Technologies, Slate Path Capital, and SoMa Equity Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Darsana Capital Partners allocated the biggest weight to The New York Times Company (NYSE:NYT), around 11.09% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, designating 9.59 percent of its 13F equity portfolio to NYT.

Seeing as The New York Times Company (NYSE:NYT) has witnessed bearish sentiment from hedge fund managers, we can see that there lies a certain "tier" of fund managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Christopher James's Partner Fund Management cut the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $42.5 million in stock, and Joe DiMenna's ZWEIG DIMENNA PARTNERS was right behind this move, as the fund dropped about $15.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The New York Times Company (NYSE:NYT) but similarly valued. We will take a look at Nexstar Media Group, Inc. (NASDAQ:NXST), Armstrong World Industries, Inc. (NYSE:AWI), Eastgroup Properties Inc (NYSE:EGP), and Black Hills Corporation (NYSE:BKH). This group of stocks' market caps resemble NYT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXST,34,1329838,-6 AWI,29,505278,-1 EGP,10,24396,-2 BKH,19,186727,3 Average,23,511560,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $1186 million in NYT's case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 10 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on NYT as the stock returned 45.3% in 2019 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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