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Were Hedge Funds Right About Dumping Twenty-First Century Fox Inc (FOX)?

How do we determine whether Twenty-First Century Fox Inc (NASDAQ:FOX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Twenty-First Century Fox Inc (NASDAQ:FOX) was in 44 hedge funds’ portfolios at the end of December. FOX investors should be aware of a decrease in enthusiasm from smart money of late. There were 49 hedge funds in our database with FOX positions at the end of the previous quarter. Our calculations also showed that FOX isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

We’re going to take a look at the fresh hedge fund action surrounding Twenty-First Century Fox Inc (NASDAQ:FOX).

How have hedgies been trading Twenty-First Century Fox Inc (NASDAQ:FOX)?

Heading into the first quarter of 2019, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the second quarter of 2018. By comparison, 30 hedge funds held shares or bullish call options in FOX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FOX_mar2019

The largest stake in Twenty-First Century Fox Inc (NASDAQ:FOX) was held by Eagle Capital Management, which reported holding $1204.7 million worth of stock at the end of September. It was followed by Yacktman Asset Management with a $1031.5 million position. Other investors bullish on the company included Baupost Group, Pentwater Capital Management, and Samlyn Capital.

Due to the fact that Twenty-First Century Fox Inc (NASDAQ:FOX) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers who sold off their entire stakes heading into Q3. At the top of the heap, Farallon Capital said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $245.6 million in stock, and Ike Kier and Ilya Zaides’s KG Funds Management was right behind this move, as the fund dropped about $72.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Twenty-First Century Fox Inc (NASDAQ:FOX). These stocks are Linde plc (NYSE:LIN), Diageo plc (NYSE:DEO), Dell Technologies Inc. (NYSE:DELL), and China Petroleum & Chemical Corp (NYSE:SNP). All of these stocks’ market caps are closest to FOX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LIN 37 1618098 37
DEO 14 891175 -1
DELL 43 2170884 -18
SNP 15 237493 2
Average 27.25 1229413 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1229 million. That figure was $5267 million in FOX’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Twenty-First Century Fox Inc (NASDAQ:FOX) is more popular among hedge funds but hedge fund sentiment is turning negative. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately FOX wasn’t in this group. Hedge funds that bet on FOX were disappointed as the stock returned 8.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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