Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in News Corp (NASDAQ:NWS)? The smart money sentiment can provide an answer to this question.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action surrounding News Corp (NASDAQ:NWS).
How are hedge funds trading News Corp (NASDAQ:NWS)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in NWS at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Charles de Vaulx’s International Value Advisers has the largest position in News Corp (NASDAQ:NWS), worth close to $43.6 million, comprising 1.2% of its total 13F portfolio. Coming in second is Tensile Capital, managed by Douglas Dossey and Arthur Young, which holds a $21.5 million position; 2.9% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Mario Gabelli’s GAMCO Investors, D. E. Shaw’s D E Shaw and Jim Simons’s Renaissance Technologies.
Seeing as News Corp (NASDAQ:NWS) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds who sold off their entire stakes in the third quarter. Interestingly, Israel Englander’s Millennium Management said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, comprising about $6.8 million in stock, and Adam Fox and Samuel Elder’s Altalis Capital Partners was right behind this move, as the fund sold off about $3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 7 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to News Corp (NASDAQ:NWS). These stocks are bluebird bio Inc (NASDAQ:BLUE), HD Supply Holdings Inc (NASDAQ:HDS), ON Semiconductor Corporation (NASDAQ:ON), and MGM Growth Properties LLC (NYSE:MGP). This group of stocks’ market valuations resemble NWS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $88 million in NWS’s case. HD Supply Holdings Inc (NASDAQ:HDS) is the most popular stock in this table. On the other hand MGM Growth Properties LLC (NYSE:MGP) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks News Corp (NASDAQ:NWS) is even less popular than MGP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.