Twenty-First Century Fox Inc (FOXA) Loses Ground on Back of Earnings Data; Do Hedge Funds Like the Stock?

Twenty-First Century Fox Inc (NASDAQ:FOXA) released its earnings results for the fourth quarter of fiscal 2014, beating the earnings estimates but missing on revenue. The company posted earnings per share of $0.39, down by 7.1% on the year, compared to $0.37 expected by analysts. Its revenue declined to $6.21 billion, down from $8.42 billion in year ago quarter, and lower that the $6.41 billion expected by Wall Street. In early trading hours today, the stock has fallen by 10% and has slightly recovered to negative 7%. Alongside the report, the company also announced a $0.15 dividend to shareholders payable on October 14.

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Let’s have a quick look at hedge fund sentiment surrounding Twenty-First Century Fox Inc (NASDAQ:FOXA) going into the second quarter of 2015. Out of the more than 700 hedge funds tracked by Insider Monkey, at the end of  the first quarter 63 held long positions worth $4.97 billion, down from 64 hedge funds with an investment worth $6.17 billion. This shows an outflow of capital during the first quarter, but investors still owned around 11% of the company at the end of March.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 123% over the last 35 months and outperformed the S&P 500 ETF (SPY) by 65 percentage points (see more details here).

With that in mind, let’s now take a look at some of the hedge funds that were invested in Twenty-First Century Fox Inc (NASDAQ:FOXA) going into the second quarter. Yacktman Asset Management, managed by Donald Yacktman, emerged as the biggest shareholder, holding 38.76 million shares with a value of $1.31 billion, representing 6.04% of its 13F portfolio. Another notable shareholder was Jeffrey Ubben’s ValueAct Capital, which held a total of 31.39 million shares valued at $1.03 billion. Eagle Capital Management, managed by Boykin Curry, came in third after ValueAct Capital, with 27.71 million shares valued at $911.27 million. Other notable shareholders include Tiger Global Management, managed by Chase Coleman, Paul Singer’s Elliott Management, and Kenneth Mario Garschina‘s Mason Capital Management.

To wrap it all up, we can say that Twenty-First Century Fox Inc (NASDAQ:FOXA) is a good stock, although its performance is dependent on many activities conducted by the company. With the entertainment industry expected to grow and the company’s expansion into emerging markets, the stock comes forth as a good long term investment.

Disclosure: none