We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Cumulus Media Inc (NASDAQ:CMLS).
Cumulus Media Inc (NASDAQ:CMLS) was in 12 hedge funds' portfolios at the end of September. CMLS investors should be aware of an increase in enthusiasm from smart money lately. There were 9 hedge funds in our database with CMLS positions at the end of the previous quarter. Our calculations also showed that CMLS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_27480" align="alignnone" width="600"] Israel Englander of Millennium 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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action encompassing Cumulus Media Inc (NASDAQ:CMLS).
What does smart money think about Cumulus Media Inc (NASDAQ:CMLS)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in CMLS a year ago. 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, Brigade Capital held the most valuable stake in Cumulus Media Inc (NASDAQ:CMLS), which was worth $34.4 million at the end of the third quarter. On the second spot was Silver Point Capital which amassed $31 million worth of shares. Beach Point Capital Management, Angelo Gordon & Co, and Greywolf Capital 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 Beach Point Capital Management allocated the biggest weight to Cumulus Media Inc (NASDAQ:CMLS), around 3.93% of its 13F portfolio. Brigade Capital is also relatively very bullish on the stock, dishing out 1.85 percent of its 13F equity portfolio to CMLS.
Consequently, key hedge funds have jumped into Cumulus Media Inc (NASDAQ:CMLS) headfirst. Millennium Management, managed by Israel Englander, created the biggest position in Cumulus Media Inc (NASDAQ:CMLS). Millennium Management had $1.2 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron's Algert Coldiron Investors also initiated a $0.2 million position during the quarter. The other funds with brand new CMLS positions are Renaissance Technologies and Paul Marshall and Ian Wace's Marshall Wace.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cumulus Media Inc (NASDAQ:CMLS) but similarly valued. We will take a look at Netfin Acquisition Corp. (NASDAQ:NFIN), Republic First Bancorp, Inc. (NASDAQ:FRBK), Moneygram International Inc (NYSE:MGI), and PDL BioPharma Inc. (NASDAQ:PDLI). This group of stocks' market caps resemble CMLS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFIN,11,42194,11 FRBK,5,5505,-1 MGI,10,15716,-3 PDLI,17,43582,4 Average,10.75,26749,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $85 million in CMLS's case. PDL BioPharma Inc. (NASDAQ:PDLI) is the most popular stock in this table. On the other hand Republic First Bancorp, Inc. (NASDAQ:FRBK) is the least popular one with only 5 bullish hedge fund positions. Cumulus Media Inc (NASDAQ:CMLS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CMLS as the stock returned 19.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.