We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Nexstar Media Group, Inc. (NASDAQ:NXST) and determine whether hedge funds skillfully traded this stock.
Nexstar Media Group, Inc. (NASDAQ:NXST) investors should pay attention to an increase in hedge fund sentiment in recent months. Nexstar Media Group, Inc. (NASDAQ:NXST) was in 42 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. Our calculations also showed that NXST isn't among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Seth Klarman of Baupost Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let's check out the recent hedge fund action surrounding Nexstar Media Group, Inc. (NASDAQ:NXST).
How are hedge funds trading Nexstar Media Group, Inc. (NASDAQ:NXST)?
At the end of the second quarter, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NXST over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Seth Klarman's Baupost Group has the most valuable position in Nexstar Media Group, Inc. (NASDAQ:NXST), worth close to $174.5 million, amounting to 2.2% of its total 13F portfolio. Coming in second is P2 Capital Partners, led by Claus Moller, holding a $110.6 million position; the fund has 9.2% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Griffin's Citadel Investment Group, Peter S. Park's Park West Asset Management and Amy Minella's Cardinal Capital. In terms of the portfolio weights assigned to each position Billings Capital Management allocated the biggest weight to Nexstar Media Group, Inc. (NASDAQ:NXST), around 11.14% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, setting aside 10.23 percent of its 13F equity portfolio to NXST.
Now, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Nexstar Media Group, Inc. (NASDAQ:NXST). Adage Capital Management had $23 million invested in the company at the end of the quarter. Eduardo Costa's Calixto Global Investors also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Stephen Mildenhall's Contrarius Investment Management, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to Nexstar Media Group, Inc. (NASDAQ:NXST). These stocks are InVitae Corporation (NYSE:NVTA), frontdoor, inc. (NASDAQ:FTDR), LendingTree, Inc (NASDAQ:TREE), Hexcel Corporation (NYSE:HXL), SL Green Realty Corp (NYSE:SLG), Cannae Holdings, Inc. (NYSE:CNNE), and Cloudera, Inc. (NYSE:CLDR). All of these stocks' market caps are closest to NXST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVTA,16,769078,6 FTDR,41,746277,8 TREE,15,102759,-6 HXL,18,230973,-9 SLG,26,258760,3 CNNE,43,596426,23 CLDR,33,855546,7 Average,27.4,508546,4.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $509 million. That figure was $822 million in NXST's case. Cannae Holdings, Inc. (NYSE:CNNE) is the most popular stock in this table. On the other hand LendingTree, Inc (NASDAQ:TREE) is the least popular one with only 15 bullish hedge fund positions. Nexstar Media Group, Inc. (NASDAQ:NXST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NXST is 79.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on NXST, though not to the same extent, as the stock returned 15.5% since the end of June and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.