Hedge Funds Exhibit Bearishness on Entertainment Stocks

At Insider Monkey, we track over 800 hedge funds and pay attention to every move they make, whether as a singular entity or collectively as a group. This enables us to get regular insights on which stocks and sector are becoming popular among hedge funds and which are falling out of favor. One such interesting insight that we gained recently after looking at the recent 13F filing of the hedge funds we track was that a lot of them reduced their exposure to the entertainment sector during the first quarter. In this post, we are going to take a look at the top five entertainment stocks on which funds covered by us became bearish collectively during that period and  will try to uncover the reasons behind their bearishness.

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#5 Viacom, Inc. (NASDAQ:VIAB)

 – Investors with long positions (as of March 31) : 42

– Aggregate value of investors’ holdings (as of March 31): $1.12 billion

Let’s start with Viacom, Inc. (NASDAQ:VIAB), which saw its ownership among funds covered by us dropping by six and the aggregate value of their holdings in it decreasing by $163 million during the first quarter. Funds that reduced their stake in Viacom, Inc. (NASDAQ:VIAB) during that period included billionaire Donald Yacktman‘s Yacktman Asset Management, which brought its holding down by 14% to 4.44 million shares. Despite the major trouble brewing within the company shares of Viacom have inched up by over 2%. On May 29, billionaire Sumner Redstone, who is the majority owner of Viacom through the stake that he and his family owns in National Amusements, ousted Viacom’s CEO Philippe Dauman and director George Abrams from the Board of National Amusements and as trustees of his family trust. According to reports, Mr. Redstone is also planning to remove the entire Board of Viacom and Mr. Dauman as the CEO of the company.

#4 CBS Corporation (NYSE:CBS)

 – Investors with long positions (as of March 31) : 61

– Aggregate value of investors’ holdings (as of March 31): $2.92 billion

CBS Corporation (NYSE:CBS) is another media company controlled by Mr. Redstone. However, so far there has been no signs that the nonagenarian businessman is looking to push any major changes in CBS Corporation (NYSE:CBS). During the first quarter, hedge funds covered by us long CBS Corporation declined by three and the aggregate value of their holdings in it shrunk by 13.4%. Though shares of CBS Corporation have appreciated by 12% so far this year, most analysts feel that they are still relatively cheap and can see a further appreciation of over 25% from the current levels. On May 3, the company reported its fourth quarter numbers, declaring EPS of $1.02 on revenue of $3.85 billion versus analysts’ expectations of EPS of $0.94 on revenue of $3.50 billion. John Shapiro‘s Chieftain Capital upped its stake in CBS Corporation by 1% to 6.94 million shares during the first quarter.

#3 Twenty-First Century Fox Inc (NASDAQ:FOXA)

 – Investors with long positions (as of March 31) : 46

– Aggregate value of investors’ holdings (as of March 31): $3.86 billion

Moving on, the number of hedge funds covered by us long Twenty-First Century Fox Inc (NASDAQ:FOXA) decreased by five during the first quarter, however, the aggregate value of their holdings in it rose by $311 million during the same period. Billionaire Jorge Paulo Lemann‘s 3G Capital was one of the firms that sold their entire stake in Twenty-First Century Fox Inc (NASDAQ:FOXA) during the January-March period. While shares of the company have gained 6.50% so far in 2016, they have lost 11.5% of their value in the past 12 months. Twenty-First Century Fox Inc announced recently that 300-400 of its employees have accepted its voluntary buyout package, which are a part of the cost-cutting program it unveiled in February to save $250 million in costs. On June 1, analysts at Credit Suisse reiterated their ‘Outperform’ rating on the stock while upping their price target on it to $38 from $34.

#2 Time Warner Inc (NYSE:TWX)

 – Investors with long positions (as of March 31) : 68

– Aggregate value of investors’ holdings (as of March 31): $3.94 billion

Though the ownership of Time Warner Inc (NYSE:TWX) among funds covered by us declined by four during the first quarter, the aggregate value of hedge fund’s holdings in the company shot up by $413 million during the same time. The media giant lost nearly one-fourth of its market capitalization in the second-half of 2015, but has seen a strong rally this year and currently trades up 17.69% year-to-date. After coming under pressure due to the rising trend of cost-cutting, Time Warner is finally shifting gears by putting emphasis on over-the-top (OTT) content. On June 3, its film and television content division Warner Bros. revealed that it has created a new unit that will focus on creating online content. Time Warner’s stock currently sports an annual dividend yield of 2.12%, which is higher than the dividend yield of all the stocks covered in this list. Legendary trader and billionaire Steve Cohen’s family office Point72 Asset Management increased its stake in Time Warner by 180% to nearly 1.8 million shares during the January-March period.

#1 Walt Disney Co (NYSE:DIS)

 – Investors with long positions (as of March 31) : 49

– Aggregate value of investors’ holdings (as of March 31): $3.09 billion

With its ownership among funds covered by us coming down by only two and the aggregate value of their holdings in it declining by 18.4%, Walt Disney Co (NYSE:DIS) topped the list of large-cap entertainment stocks that saw the least decline in popularity among funds during the first quarter. Shares of Walt Disney Co (NYSE:DIS) were trading flat for the year going into its second quarter earnings, but have tumbled since then and currently trade down by over 7% year-to-date. For its fiscal 2016 second quarter, the company reported EPS of $1.36 on revenue of $12.97 billion, compared to EPS of $1.23 on revenue of $12.46 billlion it had delivered a year earlier. Some 16 of the 34 analysts on Wall Street who cover the stock currently have a ‘Buy’ rating on it. Ken Fisher‘s Fisher Asset Management inched up its stake in Walt Disney by 1% to 8.64 million shares and continued to remain its largest shareholder at the end of that period.

Disclosure: None