We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Fox Corporation (NASDAQ:FOX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Fox Corporation (NASDAQ:FOX) shareholders have witnessed a decrease in hedge fund interest of late. FOX was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 29 hedge funds in our database with FOX holdings at the end of the previous quarter. Our calculations also showed that FOX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the latest hedge fund action surrounding Fox Corporation (NASDAQ:FOX).
How are hedge funds trading Fox Corporation (NASDAQ:FOX)?
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FOX over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fox Corporation (NASDAQ:FOX) was held by Yacktman Asset Management, which reported holding $305 million worth of stock at the end of September. It was followed by Baupost Group with a $206.8 million position. Other investors bullish on the company included Eagle Capital Management, Renaissance Technologies, and GAMCO Investors. In terms of the portfolio weights assigned to each position JNE Partners allocated the biggest weight to Fox Corporation (NASDAQ:FOX), around 23.17% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, dishing out 4.49 percent of its 13F equity portfolio to FOX.
Because Fox Corporation (NASDAQ:FOX) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Michael A. Price and Amos Meron’s Empyrean Capital Partners dumped the largest stake of all the hedgies watched by Insider Monkey, valued at close to $43.9 million in stock. Andre F. Perold’s fund, HighVista Strategies, also sold off its stock, about $3.9 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Fox Corporation (NASDAQ:FOX) but similarly valued. These stocks are McCormick & Company, Incorporated (NYSE:MKC), Northern Trust Corporation (NASDAQ:NTRS), Weyerhaeuser Co. (NYSE:WY), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). All of these stocks’ market caps match FOX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKC | 24 | 155508 | -6 |
| NTRS | 35 | 485910 | 12 |
| WY | 30 | 323789 | 0 |
| IDXX | 37 | 540337 | 4 |
| Average | 31.5 | 376386 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $376 million. That figure was $936 million in FOX’s case. IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the most popular stock in this table. On the other hand McCormick & Company, Incorporated (NYSE:MKC) is the least popular one with only 24 bullish hedge fund positions. Fox Corporation (NASDAQ:FOX) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately FOX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FOX investors were disappointed as the stock returned -23.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
