Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title "Recession is Imminent: We Need A Travel Ban NOW". We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
Is Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) was in 42 hedge funds' portfolios at the end of the fourth quarter of 2019. CCO investors should pay attention to a decrease in support from the world's most elite money managers recently. There were 44 hedge funds in our database with CCO positions at the end of the previous quarter. Our calculations also showed that CCO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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 stocks that are in our short portfolio.
[caption id="attachment_30621" align="aligncenter" width="400"] Cliff Asness of AQR Capital Management[/caption]
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, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let's take a look at the new hedge fund action regarding Clear Channel Outdoor Holdings, Inc. (NYSE:CCO).
What have hedge funds been doing with Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)?
At Q4's end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCO over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Mason Capital Management held the most valuable stake in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), which was worth $66.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $50.9 million worth of shares. Honeycomb Asset Management, Marathon Asset Management, and Brigade Capital 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 Mason Capital Management allocated the biggest weight to Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), around 22.74% of its 13F portfolio. Marathon Asset Management is also relatively very bullish on the stock, designating 16 percent of its 13F equity portfolio to CCO.
Since Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) has witnessed declining sentiment from hedge fund managers, it's safe to say that there were a few funds who sold off their entire stakes heading into Q4. At the top of the heap, David Costen Haley's HBK Investments said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, valued at about $12.6 million in stock, and Jonathan Barrett and Paul Segal's Luminus Management was right behind this move, as the fund sold off about $5.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) but similarly valued. We will take a look at Goosehead Insurance, Inc. (NASDAQ:GSHD), Rambus Inc. (NASDAQ:RMBS), Sykes Enterprises, Incorporated (NASDAQ:SYKE), and Osisko Gold Royalties Ltd (NYSE:OR). All of these stocks' market caps are closest to CCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSHD,9,53749,-1 RMBS,19,173795,-5 SYKE,18,98479,4 OR,13,66565,-1 Average,14.75,98147,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $370 million in CCO's case. Rambus Inc. (NASDAQ:RMBS) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) 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. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 percentage points. Unfortunately CCO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CCO were disappointed as the stock returned -48.6% during the first two months of 2020 (through March 9th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.