Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
News Corp (NASDAQ:NWSA) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that NWSA isn’t among the 30 most popular stocks among hedge funds.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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.
We’re going to take a look at the new hedge fund action surrounding News Corp (NASDAQ:NWSA).
How have hedgies been trading News Corp (NASDAQ:NWSA)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in NWSA over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of News Corp (NASDAQ:NWSA), with a stake worth $297.3 million reported as of the end of September. Trailing Pzena Investment Management was International Value Advisers, which amassed a stake valued at $164.4 million. D E Shaw, AQR Capital Management, and Tensile Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, created the biggest position in News Corp (NASDAQ:NWSA). Hudson Bay Capital Management had $9.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $7 million investment in the stock during the quarter. The following funds were also among the new NWSA investors: Jim Simons’s Renaissance Technologies, Jonathan Barrett and Paul Segal’s Luminus Management, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as News Corp (NASDAQ:NWSA) but similarly valued. We will take a look at Lamar Advertising Company (REIT) (NASDAQ:LAMR), Okta, Inc. (NASDAQ:OKTA), Whirlpool Corporation (NYSE:WHR), and Pentair plc (NYSE:PNR). This group of stocks’ market values are similar to NWSA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAMR | 19 | 310683 | 1 |
| OKTA | 32 | 601342 | 5 |
| WHR | 23 | 586011 | -1 |
| PNR | 24 | 710513 | 1 |
| Average | 24.5 | 552137 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $552 million. That figure was $712 million in NWSA’s case. Okta, Inc. (NASDAQ:OKTA) is the most popular stock in this table. On the other hand Lamar Advertising Company (REIT) (NASDAQ:LAMR) is the least popular one with only 19 bullish hedge fund positions. News Corp (NASDAQ:NWSA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OKTA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
