How do we determine whether Nexstar Media Group, Inc. (NASDAQ:NXST) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Nexstar Media Group, Inc. (NASDAQ:NXST) a healthy stock for your portfolio? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets dropped by 3 recently. Our calculations also showed that NXST isn't among the 30 most popular stocks among hedge funds.
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 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 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.
Let's take a glance at the recent hedge fund action regarding Nexstar Media Group, Inc. (NASDAQ:NXST).
How are hedge funds trading Nexstar Media Group, Inc. (NASDAQ:NXST)?
At Q1's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2018. On the other hand, there were a total of 40 hedge funds with a bullish position in NXST a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Nexstar Media Group, Inc. (NASDAQ:NXST) was held by Windacre Partnership, which reported holding $186.5 million worth of stock at the end of March. It was followed by P2 Capital Partners with a $160.9 million position. Other investors bullish on the company included Park West Asset Management, Hound Partners, and Baupost Group.
Judging by the fact that Nexstar Media Group, Inc. (NASDAQ:NXST) has experienced bearish sentiment from hedge fund managers, it's safe to say that there were a few fund managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Parag Vora's HG Vora Capital Management dropped the largest position of all the hedgies followed by Insider Monkey, worth about $121.9 million in call options. Peter S. Park's fund, Park West Asset Management, also sold off its call options, about $118 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Nexstar Media Group, Inc. (NASDAQ:NXST). We will take a look at Genesee & Wyoming Inc (NYSE:GWR), Kemper Corporation (NYSE:KMPR), Stericycle Inc (NASDAQ:SRCL), and Zynga Inc (NASDAQ:ZNGA). This group of 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 GWR,22,409479,4 KMPR,8,83442,-7 SRCL,22,560523,3 ZNGA,35,799497,6 Average,21.75,463235,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $463 million. That figure was $1071 million in NXST's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 8 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. 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NXST wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NXST were disappointed as the stock returned -2.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.