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In this article we are going to use hedge fund sentiment as a tool and determine whether Gannett Co., Inc. (NYSE:GCI) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Gannett Co., Inc. (NYSE:GCI) the right pick for your portfolio? The best stock pickers were getting more optimistic. The number of bullish hedge fund bets went up by 6 in recent months. Gannett Co., Inc. (NYSE:GCI) was in 21 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that GCI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 15 hedge funds in our database with GCI holdings at the end of December.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's view the key hedge fund action regarding Gannett Co., Inc. (NYSE:GCI).
Do Hedge Funds Think GCI Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in GCI over the last 23 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Alta Fundamental Advisers held the most valuable stake in Gannett Co., Inc. (NYSE:GCI), which was worth $35.8 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $24.6 million worth of shares. Contrarius Investment Management, Omega Advisors, and Becker Drapkin Management 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 Alta Fundamental Advisers allocated the biggest weight to Gannett Co., Inc. (NYSE:GCI), around 21.24% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, dishing out 1.69 percent of its 13F equity portfolio to GCI.
As aggregate interest increased, some big names have been driving this bullishness. Contrarius Investment Management, managed by Stephen Mildenhall, assembled the most valuable position in Gannett Co., Inc. (NYSE:GCI). Contrarius Investment Management had $12 million invested in the company at the end of the quarter. Matthew Drapkin and Steven R. Becker's Becker Drapkin Management also made a $6 million investment in the stock during the quarter. The following funds were also among the new GCI investors: Steve Pigott's Fort Baker Capital Management, Nick Thakore's Diametric Capital, and Richard Walters II's Stony Point Capital.
Let's now take a look at hedge fund activity in other stocks similar to Gannett Co., Inc. (NYSE:GCI). We will take a look at Vinci Partners Investments Ltd. (NASDAQ:VINP), MRC Global Inc (NYSE:MRC), QCR Holdings, Inc. (NASDAQ:QCRH), Magic Software Enterprises Ltd. (NASDAQ:MGIC), Armada Hoffler Properties Inc (NYSE:AHH), Bonanza Creek Energy Inc (NYSE:BCEI), and Immatics N.V. (NASDAQ:IMTX). This group of stocks' market caps are similar to GCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VINP,13,79275,13 MRC,15,64342,-3 QCRH,13,74904,0 MGIC,5,17899,0 AHH,9,47661,-1 BCEI,19,72523,2 IMTX,23,192237,1 Average,13.9,78406,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $85 million in GCI's case. Immatics N.V. (NASDAQ:IMTX) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 5 bullish hedge fund positions. Gannett Co., Inc. (NYSE:GCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GCI is 83.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately GCI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GCI were disappointed as the stock returned -10% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.