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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Tribune Publishing Company (NASDAQ:TPCO).
Is TPCO a good stock to buy now? Hedge funds were becoming less confident. The number of bullish hedge fund bets retreated by 2 recently. Tribune Publishing Company (NASDAQ:TPCO) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 16. Our calculations also showed that TPCO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we scour multiple sources to uncover 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 and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a glance at the latest hedge fund action surrounding Tribune Publishing Company (NASDAQ:TPCO).
Do Hedge Funds Think TPCO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the second quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in TPCO a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alden Global Capital held the most valuable stake in Tribune Publishing Company (NASDAQ:TPCO), which was worth $134.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.1 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Winton 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 Alden Global Capital allocated the biggest weight to Tribune Publishing Company (NASDAQ:TPCO), around 48.88% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to TPCO.
Since Tribune Publishing Company (NASDAQ:TPCO) has experienced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few money managers that decided to sell off their full holdings in the third quarter. It's worth mentioning that Israel Englander's Millennium Management dumped the biggest position of the "upper crust" of funds watched by Insider Monkey, valued at about $0.5 million in stock, and Roger Ibbotson's Zebra Capital Management was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Tribune Publishing Company (NASDAQ:TPCO) but similarly valued. We will take a look at Viad Corp (NYSE:VVI), UroGen Pharma Ltd. (NASDAQ:URGN), Lands' End, Inc. (NASDAQ:LE), Sabine Royalty Trust (NYSE:SBR), Lindblad Expeditions Holdings Inc (NASDAQ:LIND), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), and Viking Therapeutics, Inc. (NASDAQ:VKTX). This group of stocks' market values are closest to TPCO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VVI,15,65128,0 URGN,4,26840,-1 LE,9,68018,-3 SBR,7,14145,2 LIND,16,48635,-2 IRCP,5,10551,0 VKTX,15,25305,-2 Average,10.1,36946,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $151 million in TPCO's case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand UroGen Pharma Ltd. (NASDAQ:URGN) is the least popular one with only 4 bullish hedge fund positions. Tribune Publishing Company (NASDAQ:TPCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TPCO is 64.9. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately TPCO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TPCO were disappointed as the stock returned 3.9% since the end of September (through 12/8) 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.
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Disclosure: None. This article was originally published at Insider Monkey.