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Is Madison Square Garden Sports Corp. (MSGS) A Good Stock To Buy?

·6 min read

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Madison Square Garden Sports Corp. (NYSE:MSGS) changed recently.

Is MSGS a good stock to buy? Madison Square Garden Sports Corp. (NYSE:MSGS) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Madison Square Garden Sports Corp. (NYSE:MSGS) was in 47 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 52. There were 44 hedge funds in our database with MSGS positions at the end of the fourth quarter. Our calculations also showed that MSGS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most stock holders, hedge funds are perceived as unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds trading today, Our experts choose to focus on the upper echelon of this group, around 850 funds. These investment experts manage most of all hedge funds' total capital, and by monitoring their inimitable investments, Insider Monkey has unsheathed many investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Mario Gabelli of GAMCO Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a gander at the latest hedge fund action surrounding Madison Square Garden Sports Corp. (NYSE:MSGS).

Do Hedge Funds Think MSGS Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in MSGS a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Silver Lake Partners was the largest shareholder of Madison Square Garden Sports Corp. (NYSE:MSGS), with a stake worth $341 million reported as of the end of March. Trailing Silver Lake Partners was Long Pond Capital, which amassed a stake valued at $170 million. GAMCO Investors, Arrowstreet Capital, and Laurion Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tiger Legatus Capital allocated the biggest weight to Madison Square Garden Sports Corp. (NYSE:MSGS), around 7.2% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, earmarking 5.8 percent of its 13F equity portfolio to MSGS.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Freshford Capital Management, managed by Michael Doheny, established the largest position in Madison Square Garden Sports Corp. (NYSE:MSGS). Freshford Capital Management had $21.8 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also made a $9.4 million investment in the stock during the quarter. The following funds were also among the new MSGS investors: Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, Eduardo Abush's Waterfront Capital Partners, and Greg Poole's Echo Street Capital Management.

Let's also examine hedge fund activity in other stocks similar to Madison Square Garden Sports Corp. (NYSE:MSGS). We will take a look at Avient Corporation (NYSE:AVNT), Wintrust Financial Corporation (NASDAQ:WTFC), Innovative Industrial Properties, Inc. (NYSE:IIPR), Antero Midstream Corp (NYSE:AM), Armstrong World Industries, Inc. (NYSE:AWI), Healthcare Realty Trust Inc (NYSE:HR), and Olink Holding AB (publ) (NASDAQ:OLK). This group of stocks' market caps are closest to MSGS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVNT,24,232031,7 WTFC,19,176919,0 IIPR,13,192649,-10 AM,17,123037,-2 AWI,25,511972,-6 HR,20,172535,-3 OLK,20,174006,20 Average,19.7,226164,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $934 million in MSGS's case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Innovative Industrial Properties, Inc. (NYSE:IIPR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Madison Square Garden Sports Corp. (NYSE:MSGS) is more popular among hedge funds. Our overall hedge fund sentiment score for MSGS is 85.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately MSGS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MSGS were disappointed as the stock returned -5.4% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.