It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). However, Goldman Sachs’ so-called VIP list, which includes 50 stocks that appear most frequently among hedge funds’ top ten holdings, has traditionally outperformed broader market benchmarks. Goldman’s Hedge Fund VIP list outperformed the S&P 500 gauge by 2.65 percentage points in 2014, 9.0 percentage points in 2013 and 7.0 percentage points in 2012. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes. Having this in mind, the following article will discuss the hedge fund activity in Time Warner Inc (NYSE:TWX) during the final quarter of 2015.
Time Warner Inc (NYSE:TWX) investors should be aware of an increase in support from the world’s most elite money managers in recent months. At the end of this article we will also compare TWX to other stocks including Occidental Petroleum Corporation (NYSE:OXY), Enterprise Products Partners L.P. (NYSE:EPD), and Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) to get a better sense of its popularity.
Follow Warner Media Llc (NYSE:TWX)
Follow Warner Media Llc (NYSE:TWX)
Today there are several formulas shareholders put to use to grade their stock investments. A duo of the most underrated formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat their index-focused peers by a significant margin (see the details here).
Time Warner Inc (NYSE:TWX) is media and entertainment company that operates through three business segments: Turner, which operates television networks and related properties; Home Box Office, which operates the HBO and Cinema multi-channel premium pay television services; and Warner Bros., which involves television production and distribution. The company generated revenue of $28.12 billion during 2015, up from $27.36 billion reported for 2014. All three segments experienced growth last year. For instance, Time Warner’s Turner segment revenues reached $10.60 billion in 2015, increasing from $10.40 billion registered in 2014 mainly because of higher revenues from the content and other, and advertising segments. Meanwhile, the company’s 2015 diluted net income per share totaled $4.62, up from $4.34 in 2014 and $3.92 in 2013. Despite the somewhat satisfactory financial performance, Time Warner Inc (NYSE:TWX)’s shares have lost 18% over the past 52 weeks.
Keeping this in mind, we’re going to take a gander at the recent action surrounding Time Warner Inc (NYSE:TWX), as well as discuss some recent rumors surrounding the company.
In the meantime, numerous news outlets have recently discussed possible activist campaigns against Time Warner Inc (NYSE:TWX), which may force the media giant to put itself for sale or spin-off of its HBO business. Reportedly, activist hedge fund Corvex Management, managed by Keith Meister, was planning on forcing Time Warner to makes some value-creating moves. Additionally, activist investor Nelson Peltz‘s Trian Fund Management is allegedly another player who could put pressure on the media and entertainment company. It is believed that the market does not properly value Time Warner Inc (NYSE:TWX)’s underlying assets, so activist pressure might unlock some trapped shareholder value. Last but not least, the shares of Time Warner are currently trading 11.35-times expected earnings, below the forward P/E multiple of 13.80 for the Movies and Entertainment industry. Competitors Walt Disney Co (NYSE:DIS) and Twenty-First Century Fox Inc. (NASDAQ:FOXA) have forward P/E ratios of 15.77 and 12.88, respectively.
What does the smart money think about Time Warner Inc (NYSE:TWX)?
Heading into 2016, a total of 72 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 4% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Greenlight Capital, managed by David Einhorn, holds the most valuable position in Time Warner Inc (NYSE:TWX). Greenlight Capital has a $416.5 million position in the stock, comprising 7.6% of its 13F portfolio. The second most bullish fund manager is D.E. Shaw & Co. L.P. of David E. Shaw, with a $368.7 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other peers that hold long positions contain John Brennan’s Sirios Capital Management, Philippe Laffont’s Coatue Management and Keith Meister’s Corvex Capital.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Folger Hill Asset Management, managed by Solomon Kumin, established the most valuable position in Time Warner Inc (NYSE:TWX). Folger Hill Asset Management had $52 million invested in the company at the end of the quarter. Howard Guberman’s Gruss Asset Management also initiated a $51.7 million position during the quarter. The other funds with brand new TWX positions are Malcolm Fairbairn’s Ascend Capital, Steve Cohen’s Point72 Asset Management, and Larry Petrella and Michael Siminerio’s PineView Asset Management.
The third page of this article discusses the hedge fund activity in several other companies that have market values similar to the one of Time Warner.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Time Warner Inc (NYSE:TWX) but similarly valued. These stocks are Occidental Petroleum Corporation (NYSE:OXY), Enterprise Products Partners L.P. (NYSE:EPD), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), and Mizuho Financial Group Inc. (ADR) (NYSE:MFG). This group of stocks’ market values resemble TWX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OXY | 44 | 1344636 | 0 |
| EPD | 20 | 173708 | -1 |
| RBS | 8 | 16988 | 2 |
| MFG | 5 | 15409 | -1 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $388 million. That figure was $3.53 billion in TWX’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (ADR) (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Time Warner Inc (NYSE:TWX) is considerably more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in more detail and potentially include it in your portfolio.
Disclosure: None
