There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze MSG Networks Inc (NYSE:MSGN).
MSG Networks Inc (NYSE:MSGN) has seen an increase in activity from the world's largest hedge funds lately. MSGN was in 23 hedge funds' portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with MSGN holdings at the end of the previous quarter. Our calculations also showed that MSGN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to go over the fresh hedge fund action encompassing MSG Networks Inc (NYSE:MSGN).
What does smart money think about MSG Networks Inc (NYSE:MSGN)?
Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MSGN over the last 16 quarters. 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 MSG Networks Inc (NYSE:MSGN) was held by Ariel Investments, which reported holding $156.7 million worth of stock at the end of March. It was followed by GAMCO Investors with a $40.9 million position. Other investors bullish on the company included Selz Capital, GLG Partners, and Renaissance Technologies.
As industrywide interest jumped, key money managers have been driving this bullishness. Selz Capital, managed by Bernard Selz, initiated the most outsized position in MSG Networks Inc (NYSE:MSGN). Selz Capital had $12.3 million invested in the company at the end of the quarter. Dipak Patel's Alight Capital also initiated a $4.1 million position during the quarter. The other funds with brand new MSGN positions are Steve Cohen's Point72 Asset Management, Dmitry Balyasny's Balyasny Asset Management, and Brandon Haley's Holocene Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as MSG Networks Inc (NYSE:MSGN) but similarly valued. These stocks are Universal Corp (NYSE:UVV), Dillard's, Inc. (NYSE:DDS), Mueller Water Products, Inc. (NYSE:MWA), and World Acceptance Corp. (NASDAQ:WRLD). All of these stocks' market caps are similar to MSGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UVV,18,118445,1 DDS,20,207603,-8 MWA,18,246157,0 WRLD,11,279010,-2 Average,16.75,212804,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $270 million in MSGN's case. Dillard's, Inc. (NYSE:DDS) is the most popular stock in this table. On the other hand World Acceptance Corp. (NASDAQ:WRLD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks MSG Networks Inc (NYSE:MSGN) 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 MSGN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MSGN were disappointed as the stock returned -21.8% 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.