We can judge whether New Media Investment Group Inc (NYSE:NEWM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
New Media Investment Group Inc (NYSE:NEWM) has experienced a decrease in activity from the world's largest hedge funds of late. NEWM was in 14 hedge funds' portfolios at the end of June. There were 17 hedge funds in our database with NEWM positions at the end of the previous quarter. Our calculations also showed that NEWM 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely 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. Let's view the recent hedge fund action encompassing New Media Investment Group Inc (NYSE:NEWM).
What does smart money think about New Media Investment Group Inc (NYSE:NEWM)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NEWM over the last 16 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Omega Advisors was the largest shareholder of New Media Investment Group Inc (NYSE:NEWM), with a stake worth $33.4 million reported as of the end of March. Trailing Omega Advisors was Citadel Investment Group, which amassed a stake valued at $7.9 million. Millennium Management, Miller Value Partners, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that New Media Investment Group Inc (NYSE:NEWM) has witnessed declining sentiment from the smart money, it's safe to say that there was a specific group of money managers who sold off their positions entirely last quarter. At the top of the heap, Renaissance Technologies said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising about $2.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also said goodbye to its stock, about $2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to New Media Investment Group Inc (NYSE:NEWM). We will take a look at Ichor Holdings, Ltd. (NASDAQ:ICHR), Ultra Clean Holdings Inc (NASDAQ:UCTT), Crossamerica Partners LP (NYSE:CAPL), and GameStop Corp. (NYSE:GME). This group of stocks' market valuations are similar to NEWM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICHR,8,51672,-2 UCTT,11,60376,2 CAPL,1,6327,-3 GME,27,117149,0 Average,11.75,58881,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $53 million in NEWM's case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. New Media Investment Group Inc (NYSE:NEWM) 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 NEWM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NEWM were disappointed as the stock returned -2.3% 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.