We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards News Corp (NASDAQ:NWS) and determine whether hedge funds skillfully traded this stock.
News Corp (NASDAQ:NWS) investors should pay attention to an increase in enthusiasm from smart money recently. NWS was in 13 hedge funds’ portfolios at the end of March. There were 7 hedge funds in our database with NWS positions at the end of the previous quarter. Our calculations also showed that NWS 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action surrounding News Corp (NASDAQ:NWS).
What have hedge funds been doing with News Corp (NASDAQ:NWS)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 86% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NWS over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in News Corp (NASDAQ:NWS). Renaissance Technologies has a $13.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Yacktman Asset Management, led by Donald Yacktman, holding a $8.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Mario Gabelli’s GAMCO Investors, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to News Corp (NASDAQ:NWS), around 0.15% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to NWS.
Consequently, specific money managers have been driving this bullishness. Yacktman Asset Management, managed by Donald Yacktman, established the most valuable position in News Corp (NASDAQ:NWS). Yacktman Asset Management had $8.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new NWS investors: Benjamin A. Smith’s Laurion Capital Management, D. E. Shaw’s D E Shaw, and Greg Eisner’s Engineers Gate Manager.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as News Corp (NASDAQ:NWS) but similarly valued. These stocks are CACI International Inc (NYSE:CACI), News Corp (NASDAQ:NWSA), PRA Health Sciences Inc (NASDAQ:PRAH), and Reinsurance Group of America Inc (NYSE:RGA). This group of stocks’ market values are closest to NWS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CACI | 25 | 321834 | 1 |
| NWSA | 28 | 296954 | 2 |
| PRAH | 29 | 189694 | -9 |
| RGA | 30 | 275843 | 3 |
| Average | 28 | 271081 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $28 million in NWS’s case. Reinsurance Group of America Inc (NYSE:RGA) is the most popular stock in this table. On the other hand CACI International Inc (NYSE:CACI) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks News Corp (NASDAQ:NWS) is even less popular than CACI. Hedge funds clearly dropped the ball on NWS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on NWS as the stock returned 30.9% so far in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
