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Hedge Funds Are Dumping Meredith Corporation (MDP)

Asma UL Husna

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Meredith Corporation (NYSE:MDP).

Meredith Corporation (NYSE:MDP) investors should be aware of a decrease in enthusiasm from smart money in recent months. Our calculations also showed that MDP isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_731890" align="aligncenter" width="392"] John Rogers of Ariel Investments[/caption]

John Rogers Ariel Investments

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the key hedge fund action surrounding Meredith Corporation (NYSE:MDP).

How have hedgies been trading Meredith Corporation (NYSE:MDP)?

At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MDP over the last 18 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the biggest position in Meredith Corporation (NYSE:MDP). Ariel Investments has a $34.3 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Royce & Associates, led by Chuck Royce, holding a $23.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Mario Gabelli's GAMCO Investors, Frederick DiSanto's Ancora Advisors and Peter Muller's PDT Partners. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Meredith Corporation (NYSE:MDP), around 0.6% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to MDP.

Due to the fact that Meredith Corporation (NYSE:MDP) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of money managers that decided to sell off their entire stakes last quarter. Interestingly, Noam Gottesman's GLG Partners cut the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $5.3 million in stock, and Thomas E. Claugus's GMT Capital was right behind this move, as the fund cut about $5.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let's now review hedge fund activity in other stocks similar to Meredith Corporation (NYSE:MDP). We will take a look at CEVA, Inc. (NASDAQ:CEVA), Harmonic Inc (NASDAQ:HLIT), Ultra Clean Holdings Inc (NASDAQ:UCTT), and Apogee Enterprises, Inc. (NASDAQ:APOG). This group of stocks' market caps are closest to MDP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CEVA,11,26258,-2 HLIT,16,60587,-3 UCTT,24,74439,5 APOG,13,54302,-3 Average,16,53897,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $82 million in MDP's case. Ultra Clean Holdings Inc (NASDAQ:UCTT) is the most popular stock in this table. On the other hand CEVA, Inc. (NASDAQ:CEVA) is the least popular one with only 11 bullish hedge fund positions. Meredith Corporation (NYSE:MDP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately MDP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MDP investors were disappointed as the stock returned 17.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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