Q3 Recap: News Corp (NWSA), eBay (EBAY) Among This Hedge Fund’s Bearish Bets

Eton Park Capital recently filed its 3Q 13F with the SEC, which gives individual investors remarkable insight into the holdings of the New York-based hedge fund. Eric Mindich founded Eton in 2004 after fifteen years with Goldman Sachs. His focus is on long/short equity positions and merger arbitrage. In Eton’s recent 13F filing, the most notable items catching our eye were large selloffs of News Corp and eBay. Here’s the hedge fund’s full portfolio.

ETON PARK CAPITAL

News Corp (NASDAQ:NWSA), even after Eton initiated a near-40% share selloff during 3Q, the media company still makes up over 9.5% of its 13F and remains its top stock holding. News Corp is expected to grow revenues by 3% in 2013, and 4% in 2014 on the back of growing advertising gains. Despite an elevated P/E at 22x trailing earnings, News Corp appears to be a good value with a forward P/E of 12x. What will also help unlock value for shareholders will be the separation of News Corp’s publishing and entertainment businesses, which will be completed in 2013. News Corp is also one of the top ten service stocks loved by hedge funds.

Dollar General Corp. (NYSE:DG) saw an 11% increase in Eton’s position from 2Q and makes up the 2nd largest 13F holding. Dollar General has performed well in a struggling economy as consumers trade down. Sales are expected to be up 9% in 2013, with same store sale growth of 5.2% helping drive that revenue expansion. Dollar General’s assortment of products and low-priced consumer staples should also allow it to perform well in a bolstering economy. Dollar General trades in line with its major competitors Dollar Tree and Family Dollar, but may still be a good value play. Dollar General trades at 19x trailing earnings, but 14x forward earnings. Couple this with their 18% five-year expected earnings growth rate and the discount retailer presents investors with growth at a very reasonable price.

Eton sold off over 35% of its Nielsen Hldg NV (NYSE:NLSN) shares during 3Q, which now make up just below 5% of the firm’s 13F. The global info company has managed to beat estimates each of the last four quarters, but remains flat year to date, presenting a potential value opportunity. At first glance Nielsen appears expensive at 30x earnings, especially compared to the business services industry, but its forward P/E of 13x looks to be one reason to go long.

Viacom, Inc. (NASDAQ:VIAB) shares owned remained relatively stable for Eton, and made up the fourth stock in Eton’s 13F. Viacom is another media company, but trades well below that of News Corp at 11x earnings. The entertainment company is expected to see revenue down 3% in 2012, but rebound to a positive 3.5% in 2013. Key drivers for Viacom will be a rise in the TV segment, including affiliate deals and advertising.

eBay Inc (NASDAQ:EBAY), meanwhile, was victim of a 38% share decrease from 2Q and is now Eton’s fifth largest equity 13F holding. The e-retailer is showing strong revenue growth, expected to be up 20% in 2012 and 14% in 2013. Driving this expansion will be PayPal, which is expected to see revenue growth of 25% in 2012. The online auction leader has a niche business model that should help fuel future earnings growth. The online auction business, along with the rapidly growing PayPal segment, is expected to grow eBay’s five-year EPS at 18% annually.

News Corp and Viacom are two media companies that have their own catalysts which should help push the company higher in the interim. Dollar General, the discount retailer, should be able to capture customers from competitors and higher end retailers as it introduces a broader line of health and beauty products.  We also like the niche business models of Nielsen and eBay and expect them to perform well in the interim. Check out all of Eton Park’s top stock picks.

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