How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gannett Co., Inc. (NYSE:GCI) and determine whether hedge funds had an edge regarding this stock.
Gannett Co., Inc. (NYSE:GCI) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that GCI 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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_88925" align="aligncenter" width="395"] Bill Miller of Miller Value Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 largest lithium producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. 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. Keeping this in mind we're going to take a gander at the latest hedge fund action surrounding Gannett Co., Inc. (NYSE:GCI).
What have hedge funds been doing with Gannett Co., Inc. (NYSE:GCI)?
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in GCI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Omega Advisors, managed by Leon Cooperman, holds the number one position in Gannett Co., Inc. (NYSE:GCI). Omega Advisors has a $11.7 million position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Randall Smith of Alden Global Capital, with a $5 million position; 1.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Jeremy Carton and Gilbert Li's Alta Fundamental Advisers, Bill Miller's Miller Value Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Gannett Co., Inc. (NYSE:GCI), around 6.5% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, setting aside 1.59 percent of its 13F equity portfolio to GCI.
Due to the fact that Gannett Co., Inc. (NYSE:GCI) has faced falling interest from hedge fund managers, logic holds that there exists a select few hedgies that slashed their positions entirely last quarter. It's worth mentioning that Wayne Cooperman's Cobalt Capital Management dropped the largest investment of the 750 funds watched by Insider Monkey, worth about $1.9 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund sold off about $1.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 9 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Gannett Co., Inc. (NYSE:GCI) but similarly valued. We will take a look at Protective Insurance Corporation (NASDAQ:PTVCB), Contango Oil & Gas Company (NYSE:MCF), Universal Technical Institute, Inc. (NYSE:UTI), and BioLife Solutions, Inc. (NASDAQ:BLFS). All of these stocks' market caps are closest to GCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTVCB,5,12042,-3 MCF,6,4195,-2 UTI,15,52223,4 BLFS,9,43065,-4 Average,8.75,27881,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $30 million in GCI's case. Universal Technical Institute, Inc. (NYSE:UTI) is the most popular stock in this table. On the other hand Protective Insurance Corporation (NASDAQ:PTVCB) 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. 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 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 but beat the market by 16.8 percentage points. Unfortunately GCI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GCI were disappointed as the stock returned 3.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.