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Hedge Funds Are Coming Back To Salem Media Group Inc. (SALM)?

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  • SALM

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Salem Media Group Inc. (NASDAQ:SALM).

Salem Media Group Inc. (NASDAQ:SALM) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. SALM shareholders have witnessed an increase in hedge fund interest of late. There were 1 hedge funds in our database with SALM holdings at the end of December. Our calculations also showed that SALM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. 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 115 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.

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. With all of this in mind let's check out the recent hedge fund action regarding Salem Media Group Inc. (NASDAQ:SALM).

Do Hedge Funds Think SALM Is A Good Stock To Buy Now?

At first quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 500% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SALM over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Verdad Advisers held the most valuable stake in Salem Media Group Inc. (NASDAQ:SALM), which was worth $2 million at the end of the fourth quarter. On the second spot was GAMCO Investors which amassed $0.8 million worth of shares. Renaissance Technologies, Citadel Investment Group, and JS 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 Verdad Advisers allocated the biggest weight to Salem Media Group Inc. (NASDAQ:SALM), around 0.65% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to SALM.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Verdad Advisers, managed by Dan Rasmussen, established the biggest position in Salem Media Group Inc. (NASDAQ:SALM). Verdad Advisers had $2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.5 million position during the quarter. The following funds were also among the new SALM investors: Ken Griffin's Citadel Investment Group, Jonathan Soros's JS Capital, and Israel Englander's Millennium Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Salem Media Group Inc. (NASDAQ:SALM) but similarly valued. These stocks are Allena Pharmaceuticals, Inc. (NASDAQ:ALNA), LENSAR, Inc. (NASDAQ:LNSR), CohBar, Inc. (NASDAQ:CWBR), Emclaire Financial Corp (NASDAQ:EMCF), Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN), Investcorp Credit Management BDC, Inc. (NASDAQ:ICMB), and QuickLogic Corporation (NASDAQ:QUIK). This group of stocks' market valuations are closest to SALM's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALNA,8,15824,1 LNSR,7,24076,0 CWBR,1,741,-2 EMCF,2,595,0 EDN,3,315,0 ICMB,1,21458,-1 QUIK,3,3067,0 Average,3.6,9439,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $4 million in SALM's case. Allena Pharmaceuticals, Inc. (NASDAQ:ALNA) is the most popular stock in this table. On the other hand CohBar, Inc. (NASDAQ:CWBR) is the least popular one with only 1 bullish hedge fund positions. Salem Media Group Inc. (NASDAQ:SALM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SALM is 65.7. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately SALM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SALM were disappointed as the stock returned -11.6% since the end of March (through 6/25) 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.