Is The Madison Square Garden Company (NYSE:MSG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is The Madison Square Garden Company (NYSE:MSG) a buy here? Hedge funds are taking a bearish view. The number of long hedge fund positions went down by 2 in recent months. Our calculations also showed that MSG isn't among the 30 most popular stocks among hedge funds (view the video below). MSG was in 50 hedge funds' portfolios at the end of June. There were 52 hedge funds in our database with MSG holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 take a glance at the recent hedge fund action regarding The Madison Square Garden Company (NYSE:MSG).
What have hedge funds been doing with The Madison Square Garden Company (NYSE:MSG)?
At the end of the second quarter, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 42 hedge funds held shares or bullish call options in MSG a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in The Madison Square Garden Company (NYSE:MSG) was held by Silver Lake Partners, which reported holding $531.9 million worth of stock at the end of March. It was followed by GAMCO Investors with a $211.6 million position. Other investors bullish on the company included Blue Harbour Group, Mason Capital Management, and Citadel Investment Group.
Because The Madison Square Garden Company (NYSE:MSG) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few funds who sold off their positions entirely in the second quarter. Intriguingly, Lee Ainslie's Maverick Capital dumped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, totaling about $19.3 million in stock. Benjamin Pass's fund, TOMS Capital, also dropped its stock, about $13.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The Madison Square Garden Company (NYSE:MSG) but similarly valued. These stocks are The Gap Inc. (NYSE:GPS), Pilgrim's Pride Corporation (NASDAQ:PPC), People's United Financial, Inc. (NASDAQ:PBCT), and Buckeye Partners, L.P. (NYSE:BPL). This group of stocks' market caps are similar to MSG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPS,21,81739,-6 PPC,19,248654,5 PBCT,18,130104,-2 BPL,13,166135,8 Average,17.75,156658,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $1808 million in MSG's case. The Gap Inc. (NYSE:GPS) is the most popular stock in this table. On the other hand Buckeye Partners, L.P. (NYSE:BPL) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks The Madison Square Garden Company (NYSE:MSG) is more popular among hedge funds. 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 MSG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MSG were disappointed as the stock returned -5.9% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.