Did Hedge Funds Make The Right Call On Fox Corporation (FOXA) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtFox Corporation (NASDAQ:FOXA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Fox Corporation (NASDAQ:FOXA) a buy here? Prominent investors were in an optimistic mood. The number of bullish hedge fund positions advanced by 1 in recent months. Our calculations also showed that FOXA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). FOXA was in 38 hedge funds’ portfolios at the end of the first quarter of 2020. There were 37 hedge funds in our database with FOXA positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Third Point

Dan Loeb of Third Point

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a gander at the new hedge fund action regarding Fox Corporation (NASDAQ:FOXA).

What does smart money think about Fox Corporation (NASDAQ:FOXA)?

Heading into the second quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FOXA over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is FOXA A Good Stock To Buy?

Among these funds, Baupost Group held the most valuable stake in Fox Corporation (NASDAQ:FOXA), which was worth $645.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $249 million worth of shares. Yacktman Asset Management, 3G Sahana Capital Management, and Brahman 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 3G Sahana Capital Management allocated the biggest weight to Fox Corporation (NASDAQ:FOXA), around 19.93% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, dishing out 9.53 percent of its 13F equity portfolio to FOXA.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. 3G Sahana Capital Management, managed by Munir Javeri, created the largest position in Fox Corporation (NASDAQ:FOXA). 3G Sahana Capital Management had $130 million invested in the company at the end of the quarter. Brett Barakett’s Tremblant Capital also made a $48.4 million investment in the stock during the quarter. The following funds were also among the new FOXA investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Steven Tananbaum’s GoldenTree Asset Management, and Christian Leone’s Luxor Capital Group.

Let’s now review hedge fund activity in other stocks similar to Fox Corporation (NASDAQ:FOXA). These stocks are Vulcan Materials Company (NYSE:VMC), Boston Properties, Inc. (NYSE:BXP), Garmin Ltd. (NASDAQ:GRMN), and Conagra Brands, Inc. (NYSE:CAG). All of these stocks’ market caps resemble FOXA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VMC 49 1119317 -3
BXP 29 185266 9
GRMN 27 394058 1
CAG 30 538429 1
Average 33.75 559268 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $1564 million in FOXA’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Garmin Ltd. (NASDAQ:GRMN) is the least popular one with only 27 bullish hedge fund positions. Fox Corporation (NASDAQ:FOXA) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately FOXA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FOXA were disappointed as the stock returned 13.5% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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