Were Hedge Funds Right About Piling Into News Corp (NWSA)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards News Corp (NASDAQ:NWSA) to find out whether there were any major changes in hedge funds’ views.

Is News Corp (NASDAQ:NWSA) the right investment to pursue these days? Money managers were betting on the stock. The number of long hedge fund positions increased by 2 lately. News Corp (NASDAQ:NWSA) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NWSA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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.

Scott Ferguson of Sachem Head Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks 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 analyze the fresh hedge fund action surrounding News Corp (NASDAQ:NWSA).

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

At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in NWSA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Yacktman Asset Management was the largest shareholder of News Corp (NASDAQ:NWSA), with a stake worth $415.7 million reported as of the end of June. Trailing Yacktman Asset Management was Arrowstreet Capital, which amassed a stake valued at $195.7 million. Citadel Investment Group, Scopus Asset Management, and Sachem Head Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 59 North Capital allocated the biggest weight to News Corp (NASDAQ:NWSA), around 9.61% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, setting aside 5.11 percent of its 13F equity portfolio to NWSA.

Now, key money managers were breaking ground themselves. Kettle Hill Capital Management, managed by Andrew Kurita, initiated the biggest position in News Corp (NASDAQ:NWSA). Kettle Hill Capital Management had $22.1 million invested in the company at the end of the quarter. Sahm Adrangi’s Kerrisdale Capital also initiated a $14.4 million position during the quarter. The other funds with brand new NWSA positions are Alexander Mitchell’s Scopus Asset Management, Ray Dalio’s Bridgewater Associates, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as News Corp (NASDAQ:NWSA) but similarly valued. These stocks are James Hardie Industries plc (NYSE:JHX), GameStop Corp. (NYSE:GME), Lumen Technologies, Inc. (NYSE:LUMN), Brown & Brown, Inc. (NYSE:BRO), Masco Corporation (NYSE:MAS), LKQ Corporation (NASDAQ:LKQ), and Cognex Corporation (NASDAQ:CGNX). This group of stocks’ market caps are similar to NWSA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $1088 million in NWSA’s case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks News Corp (NASDAQ:NWSA) is more popular among hedge funds. Our overall hedge fund sentiment score for NWSA is 87. 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. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Unfortunately NWSA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NWSA were disappointed as the stock returned -5% since the end of the second quarter (through 11/5) 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 since 2019.

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