Barclays PLC (ADR) (NYSE:BCS) has picked Comcast Corporation (NASDAQ:CMCSA), Facebook Inc (NASDAQ:FB) and Twenty-First Century Fox Inc (NASDAQ:FOXA) as their top choices in the Internet and Media category for their latest Americas Top Picks List.
According to Barclays PLC (ADR) (NYSE:BCS), Comcast (NASDAQ: CMCSA), which it has a $68 per share price target on, presents “an attractive opportunity”, as it believes the market’s valuation of the firm’s cable business is low at only six times EBITDA, which is similar to the valuation of newspaper businesses. The firm also points out that Comcast has a smaller enterprise value (EV) than Walt Disney Co (NYSE:DIS), even though it has a 60% larger EBITDA. Furthermore, Comcast’s Free Cash Flow and EBITDA are similar to Disney’s on the media side, the firm notes, but it trades at a discount to Disney.
On the other hand, Facebook Inc (NASDAQ:FB), Barclays says, is “likely to be a major beneficiary” of the continued move of advertising dollars online, particularly to the mobile sector. The firm, which it has a $98 per share price target on, now has over 73% of its ad revenue coming from its mobile operations. Despite near-term foreign exchange headwinds, Barclays believes the world’s largest social networking company is “well positioned to capitalize” on major online trends.
Twenty-First Century Fox Inc (NASDAQ:FOXA), which Barclays PLC (ADR) (NYSE:BCS) has a $39 per share price target on, is described as “the most attractive name in our coverage” by the financial firm. It says that while there may be concerns about potential negative outlook revisions and management transitions, these risks are widely understood. The media firm is also less exposed to advertising pressure compared to its rivals, Barclays says, while “its growth is outpacing the industry, even on our conservative numbers; and it has exposure to international growth in markets like India.”
Despite the glowing recommendations for these three companies, however, Facebook was the only company with increased hedge fund interest by the end of the first quarter among the funds tracked by Insider Monkey. Comcast and Twenty-First Century Fox experienced a decrease in hedge fund interest.
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 145% over the ensuing 32 months, outperforming the S&P 500 Index by nearly 85 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Insider sentiment is another metric Insider Monkey considers when analyzing whether a company’s shares are a good investment. This is because sales or purchases of stock by insiders signal whether those in the know are confident in their firm’s success. In the case of Comcast, the latest insider transaction was Vice Chairman and Chief Financial Officer Micheal Angelakis selling 382,566 shares at the start of June. There were no purchases of shares in Comcast by insiders within the first six months of 2015. Like Comcast, Facebook did not have any insider purchases in the first half of the year. Its latest insider transactions were sales of shares, like Vice President for Marketing and Business Partnerships, David Fischer, selling 37,500 shares in two transactions on June 25 and 26. There were also no insider purchases at Twenty-First Century Fox year-to-date. The firm also has no recorded sales in the same period. Keeping this in mind, we’re going to take a deeper look at how hedge funds have been trading Comcast (NASDAQ: CMCSA), Facebook (NASDAQ:FB) and Twenty-First Century Fox Inc (NASDAQ:FOXA).
What have hedge funds been doing with Comcast Corporation (NASDAQ:CMCSA), Facebook Inc (NASDAQ:FB) and Twenty-First Century Fox Inc (NASDAQ:FOXA)?
By March 31, a total of 91 of the hedge funds tracked by Insider Monkey held long positions in Comcast, a decline of 3% from one quarter earlier. Lansdowne Partners, managed by Alex Snow, holds the largest position in Comcast Corporation (NASDAQ:CMCSA). Lansdowne Partners has a $1.23 billion position in the stock comprised of 21.71 million shares, making up 11% of its 13F portfolio. The second-largest stake is held by Fisher Asset Management, managed by Ken Fisher, which held a $683.8 million position of 12.11 million shares; the fund had 1.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Daniel S. Och’s OZ Management, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors.
Also at the end of the first quarter, a total of 129 of the hedge funds tracked by Insider Monkey were bullish on Facebook, an increase of 9% from the end of the fourth quarter of last year. The total value of their holdings decreased, however, to $7.09 billion at the end of the first quarter, from $7.9 billion at the end of the fourth quarter, a decrease of 10.27% despite the stock’s 5.38% rise in the first quarter. According to hedge fund intelligence website Insider Monkey, Lone Pine Capital, managed by Stephen Mandel, holds the largest position in Facebook Inc (NASDAQ:FB). Lone Pine Capital has a $666.5 million position in the stock consisting of about 8.11 million shares, and comprising 2.5% of its 13F portfolio. The second-largest stake is held by Coatue Management, led by Philippe Laffont, holding a $650.2 million position of about 7.91 million shares; 6.2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise David E. Shaw’s D.E. Shaw & Co., L.P., Israel Englander’s Millennium Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Also at the end of the maiden quarter of the year, 63 of the hedge funds tracked by Insider Monkey were long in Twenty-First Century Fox, a 2% slide from one quarter prior. Of the funds tracked by Insider Monkey, Yacktman Asset Management, managed by Donald Yacktman, holds the largest position in Twenty-First Century Fox Inc (NASDAQ:FOXA). Yacktman Asset Management has a $1.31 billion position in the stock, made up of about 38.76 million shares, comprising 6% of its 13F portfolio. Sitting at the number 2 spot is Chase Coleman of Tiger Global Management, with a $568.7 million position of 16.81 million shares; the firm has 6.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain John Armitage’s Egerton Capital Limited, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Warren Buffett’s Berkshire Hathaway.