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In this article you are going to find out whether hedge funds think Outfront Media Inc (NYSE:OUT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Outfront Media Inc (NYSE:OUT) undervalued? The best stock pickers are in a bearish mood. The number of long hedge fund bets retreated by 1 in recent months. Our calculations also showed that OUT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). OUT was in 30 hedge funds' portfolios at the end of March. There were 31 hedge funds in our database with OUT holdings at the end of the previous quarter.
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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Ricky Sandler of Eminence Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the key hedge fund action surrounding Outfront Media Inc (NYSE:OUT).
How have hedgies been trading Outfront Media Inc (NYSE:OUT)?
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OUT over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Outfront Media Inc (NYSE:OUT) was held by Select Equity Group, which reported holding $85.7 million worth of stock at the end of September. It was followed by Eminence Capital with a $49 million position. Other investors bullish on the company included ValueAct Capital, Renaissance Technologies, and P2 Capital Partners. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to Outfront Media Inc (NYSE:OUT), around 3.63% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, earmarking 2.91 percent of its 13F equity portfolio to OUT.
Seeing as Outfront Media Inc (NYSE:OUT) has experienced declining sentiment from hedge fund managers, it's safe to say that there were a few hedge funds that elected to cut their positions entirely in the first quarter. It's worth mentioning that Jonathan Litt's Land & Buildings Investment Management sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, worth about $34.5 million in stock. Greg Poole's fund, Echo Street Capital Management, also cut its stock, about $28.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Outfront Media Inc (NYSE:OUT) but similarly valued. We will take a look at Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Sunstone Hotel Investors Inc (NYSE:SHO), Columbia Banking System Inc (NASDAQ:COLB), and Endava plc (NYSE:DAVA). This group of stocks' market caps match OUT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSOD,24,505400,-5 SHO,19,110027,-3 COLB,12,81200,2 DAVA,9,54064,2 Average,16,187673,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $329 million in OUT's case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Outfront Media Inc (NYSE:OUT) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately OUT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on OUT were disappointed as the stock returned 4.2% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.