Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about iHeartMedia, Inc. (NASDAQ:IHRT).
iHeartMedia, Inc. (NASDAQ:IHRT) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that IHRT 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30614" align="aligncenter" width="489"] Howard Marks of Oaktree Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the key hedge fund action regarding iHeartMedia, Inc. (NASDAQ:IHRT).
What does smart money think about iHeartMedia, Inc. (NASDAQ:IHRT)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26 from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in IHRT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in iHeartMedia, Inc. (NASDAQ:IHRT) was held by Brigade Capital, which reported holding $41.8 million worth of stock at the end of September. It was followed by Contrarian Capital with a $34.1 million position. Other investors bullish on the company included Sculptor Capital, Oaktree Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Highfields Capital Management allocated the biggest weight to iHeartMedia, Inc. (NASDAQ:IHRT), around 5.14% of its portfolio. Contrarian Capital is also relatively very bullish on the stock, dishing out 3.11 percent of its 13F equity portfolio to IHRT.
As one would reasonably expect, some big names were breaking ground themselves. Brigade Capital, managed by Don Morgan, initiated the biggest position in iHeartMedia, Inc. (NASDAQ:IHRT). Brigade Capital had $41.8 million invested in the company at the end of the quarter. Jon Bauer's Contrarian Capital also initiated a $34.1 million position during the quarter. The other funds with brand new IHRT positions are Sculptor Capital, Howard Marks's Oaktree Capital Management, and David E. Shaw's D E Shaw.
Let's now take a look at hedge fund activity in other stocks similar to iHeartMedia, Inc. (NASDAQ:IHRT). We will take a look at 3D Systems Corporation (NYSE:DDD), Astronics Corporation (NASDAQ:ATRO), Range Resources Corporation (NYSE:RRC), and Noble Midstream Partners LP (NYSE:NBLX). This group of stocks' market values match IHRT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DDD,12,39120,1 ATRO,13,103363,-5 RRC,26,263175,-5 NBLX,4,2598,0 Average,13.75,102064,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $179 million in IHRT's case. Range Resources Corporation (NYSE:RRC) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 4 bullish hedge fund positions. iHeartMedia, Inc. (NASDAQ:IHRT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IHRT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on IHRT were disappointed as the stock returned 2.6% during the fourth quarter (through the end of November) 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.