Is News Corp (NWS) A Good Stock To Buy?

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of News Corp (NASDAQ:NWS) based on that data.

Is NWS a good stock to buy? The smart money was getting less bullish. The number of long hedge fund bets fell by 2 lately. News Corp (NASDAQ:NWS) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 21. Our calculations also showed that NWS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 21 hedge funds in our database with NWS positions at the end of the first quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Michael Hintze of CQS Cayman LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this stock pitch. We go through lists like the 10 best growth stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the recent hedge fund action surrounding News Corp (NASDAQ:NWS).

Do Hedge Funds Think NWS Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NWS over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in News Corp (NASDAQ:NWS) was held by Arrowstreet Capital, which reported holding $49.5 million worth of stock at the end of June. It was followed by CQS Cayman LP with a $28.1 million position. Other investors bullish on the company included Echo Street Capital Management, Becker Drapkin Management, and Yacktman Asset Management. In terms of the portfolio weights assigned to each position Becker Drapkin Management allocated the biggest weight to News Corp (NASDAQ:NWS), around 4.56% of its 13F portfolio. CQS Cayman LP is also relatively very bullish on the stock, setting aside 1.56 percent of its 13F equity portfolio to NWS.

Judging by the fact that News Corp (NASDAQ:NWS) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their positions entirely heading into Q3. Interestingly, Ken Griffin’s Citadel Investment Group dropped the largest investment of the 750 funds followed by Insider Monkey, comprising close to $0.7 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as News Corp (NASDAQ:NWS) but similarly valued. These stocks are Loews Corporation (NYSE:L), Solaredge Technologies Inc (NASDAQ:SEDG), PulteGroup, Inc. (NYSE:PHM), Telefonica Brasil SA (NYSE:VIV), Ceridian HCM Holding Inc. (NYSE:CDAY), Leidos Holdings Inc (NYSE:LDOS), and RH (NYSE:RH). This group of stocks’ market valuations are closest to NWS’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $1125 million. That figure was $179 million in NWS’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 9 bullish hedge fund positions. News Corp (NASDAQ:NWS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NWS is 41.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately NWS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NWS investors were disappointed as the stock returned 0.5% since the end of June (through 10/22) 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 in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.