We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Entercom Communications Corp. (NYSE:ETM) and determine whether hedge funds skillfully traded this stock.
Is Entercom Communications Corp. (NYSE:ETM) the right investment to pursue these days? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund positions rose by 1 recently. Entercom Communications Corp. (NYSE:ETM) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. Our calculations also showed that ETM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are several tools shareholders use to analyze their holdings. A couple of the less known tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top fund managers can outperform their index-focused peers by a significant amount (see the details here).
David E. Shaw of D.E. Shaw
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to go over the key hedge fund action encompassing Entercom Communications Corp. (NYSE:ETM).
What does smart money think about Entercom Communications Corp. (NYSE:ETM)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ETM over the last 20 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Tensile Capital held the most valuable stake in Entercom Communications Corp. (NYSE:ETM), which was worth $2.5 million at the end of the third quarter. On the second spot was Solas Capital Management which amassed $2.3 million worth of shares. D E Shaw, Millennium Management, and Minerva Advisors 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 Solas Capital Management allocated the biggest weight to Entercom Communications Corp. (NYSE:ETM), around 2.17% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, designating 0.45 percent of its 13F equity portfolio to ETM.
As one would reasonably expect, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Entercom Communications Corp. (NYSE:ETM). Arrowstreet Capital had $0.4 million invested in the company at the end of the quarter. Thyra Zerhusen's Fairpointe Capital also initiated a $0.2 million position during the quarter. The following funds were also among the new ETM investors: Donald Sussman's Paloma Partners, Michael Gelband's ExodusPoint Capital, and Bruce Kovner's Caxton Associates LP.
Let's now take a look at hedge fund activity in other stocks similar to Entercom Communications Corp. (NYSE:ETM). We will take a look at Metalla Royalty & Streaming Ltd. (NYSE:MTA), CTO Realty Growth Inc (NYSE:CTO), BRT Apartments Corp (NYSE:BRT), SB One Bancorp (NASDAQ:SBBX), Aravive, Inc. (NASDAQ:ARAV), National Bankshares Inc. (NASDAQ:NKSH), and Hurco Companies, Inc. (NASDAQ:HURC). All of these stocks' market caps are closest to ETM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTA,4,1398,3 CTO,12,20553,2 BRT,5,10382,-1 SBBX,6,9814,0 ARAV,7,27806,1 NKSH,2,13728,0 HURC,4,28885,-1 Average,5.7,16081,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $11 million in ETM's case. CTO Realty Growth Inc (NYSE:CTO) is the most popular stock in this table. On the other hand National Bankshares Inc. (NASDAQ:NKSH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Entercom Communications Corp. (NYSE:ETM) is more popular among hedge funds. Our overall hedge fund sentiment score for ETM is 75.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on ETM as the stock returned 16.7% since the end of June 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.
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Disclosure: None. This article was originally published at Insider Monkey.