Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Madison Square Garden Sports Corp. (NYSE:MSGS) to find out whether there were any major changes in hedge funds' views.
Madison Square Garden Sports Corp. (NYSE:MSGS) was in 35 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 52. MSGS has seen a decrease in support from the world's most elite money managers of late. There were 37 hedge funds in our database with MSGS holdings at the end of June. Our calculations also showed that MSGS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Mario Gabelli of GAMCO Investors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a peek at the latest hedge fund action encompassing Madison Square Garden Sports Corp. (NYSE:MSGS).
Do Hedge Funds Think MSGS Is A Good Stock To Buy Now?
At third quarter's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2021. On the other hand, there were a total of 48 hedge funds with a bullish position in MSGS 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, Silver Lake Partners held the most valuable stake in Madison Square Garden Sports Corp. (NYSE:MSGS), which was worth $353.3 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $160.6 million worth of shares. Ariel Investments, Long Pond Capital, and GAMCO Investors 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 5.75% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, designating 5.47 percent of its 13F equity portfolio to MSGS.
Seeing as Madison Square Garden Sports Corp. (NYSE:MSGS) has experienced a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers that decided to sell off their full holdings heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest stake of the 750 funds watched by Insider Monkey, comprising an estimated $28.8 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dumped its stock, about $9.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Madison Square Garden Sports Corp. (NYSE:MSGS) but similarly valued. These stocks are DT Midstream Inc. (NYSE:DTM), John Bean Technologies Corporation (NYSE:JBT), Hawaiian Electric Industries, Inc. (NYSE:HE), Sprinklr Inc. (NYSE:CXM), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), MSC Industrial Direct Co Inc (NYSE:MSM), and Terreno Realty Corporation (NYSE:TRNO). This group of stocks' market caps are similar to MSGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DTM,22,482419,22 JBT,13,124009,-6 HE,14,42020,0 CXM,11,61128,11 MTSI,18,167696,-6 MSM,25,385942,7 TRNO,18,97710,2 Average,17.3,194418,4.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $1144 million in MSGS's case. MSC Industrial Direct Co Inc (NYSE:MSM) is the most popular stock in this table. On the other hand Sprinklr Inc. (NYSE:CXM) is the least popular one with only 11 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 73.2. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 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 -7.4% since the end of the third quarter (through 11/30) 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.