Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards News Corp (NASDAQ:NWSA) to find out whether it was one of their high conviction long-term ideas.
News Corp (NASDAQ:NWSA) was included in the equity portfolios of 33 funds tracked by us at the end of September. The company saw a slight decrease in hedge fund sentiment during the third quarter, as there had been 35 with NWSA holdings at the end of the previous quarter. At the end of this article we will also compare NWSA to other stocks, including AerCap Holdings N.V. (NYSE:AER), American Capital Agency Corp. (NASDAQ:AGNC), and Vipshop Holdings Ltd – ADR (NYSE:VIPS) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s review the recent action regarding News Corp (NASDAQ:NWSA).
How are hedge funds trading News Corp (NASDAQ:NWSA)?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long News Corp, down by 6% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management has the number one position in News Corp (NASDAQ:NWSA), worth close to $351.2 million, accounting for 2.1% of its total 13F portfolio. On Pzena Investment Management’s heels is International Value Advisers, led by Charles de Vaulx, holding a $273 million position; 8.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish consist of Cliff Asness’ AQR Capital Management, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Jonathon Jacobson’s Highfields Capital Management.
Judging by the fact that News Corp (NASDAQ:NWSA) has witnessed declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedgies who were dropping their positions entirely during the third quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the largest stake of all the hedgies watched by Insider Monkey, valued at about $2.8 million in stock. John Fichthorn’s fund, Dialectic Capital Management, also said goodbye to its stock worth about $1.1 million.
Let’s go over hedge fund activity in other stocks similar to News Corp (NASDAQ:NWSA). These stocks are AerCap Holdings N.V. (NYSE:AER), American Capital Agency Corp. (NASDAQ:AGNC), Vipshop Holdings Ltd – ADR (NYSE:VIPS), and E TRADE Financial Corporation (NASDAQ:ETFC). This group of stocks’ market values match NWSA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AER | 32 | 1377736 | -4 |
| AGNC | 11 | 154784 | -8 |
| VIPS | 38 | 935685 | 13 |
| ETFC | 34 | 1081614 | -1 |
As you can see these stocks had an average of 29 funds with bullish positions and the average amount invested in these stocks was $887 million. That figure was $1.02 billion in NWSA’s case. Vipshop Holdings Ltd – ADR (NYSE:VIPS) is the most popular stock in this table with 38 funds holding shares. On the other hand American Capital Agency Corp. (NASDAQ:AGNC) is the least popular one with only 11 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 Vipshop Holdings Ltd – ADR (NYSE:VIPS) might be a better candidate to consider a long position.
