Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of The E.W. Scripps Company (NYSE:SSP) and see how the stock is affected by the recent hedge fund activity.
The E.W. Scripps Company (NYSE:SSP) has experienced a decrease in hedge fund sentiment of late. SSP was in 17 hedge funds' portfolios at the end of the second quarter of 2019. There were 25 hedge funds in our database with SSP positions at the end of the previous quarter. Our calculations also showed that SSP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a glance at the new hedge fund action surrounding The E.W. Scripps Company (NYSE:SSP).
How have hedgies been trading The E.W. Scripps Company (NYSE:SSP)?
At Q2's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -32% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in SSP a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the largest position in The E.W. Scripps Company (NYSE:SSP). GAMCO Investors has a $96.7 million position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is Cove Street Capital, managed by Jeffrey Bronchick, which holds a $16.5 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass David P. Cohen's Minerva Advisors, Renaissance Technologies and Jamie Zimmerman's Litespeed Management.
Seeing as The E.W. Scripps Company (NYSE:SSP) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of money managers that slashed their full holdings heading into Q3. Intriguingly, Chuck Royce's Royce & Associates cut the largest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $3 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dumped about $2.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 8 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The E.W. Scripps Company (NYSE:SSP) but similarly valued. We will take a look at Amerisafe, Inc. (NASDAQ:AMSF), Oxford Industries, Inc. (NYSE:OXM), K12 Inc. (NYSE:LRN), and AtriCure Inc. (NASDAQ:ATRC). This group of stocks' market valuations are closest to SSP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMSF,12,28328,0 OXM,13,93351,2 LRN,22,161549,-2 ATRC,20,115819,-5 Average,16.75,99762,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $153 million in SSP's case. K12 Inc. (NYSE:LRN) is the most popular stock in this table. On the other hand Amerisafe, Inc. (NASDAQ:AMSF) is the least popular one with only 12 bullish hedge fund positions. The E.W. Scripps Company (NYSE:SSP) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SSP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SSP were disappointed as the stock returned -12.8% during the third 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 20 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.