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Were Hedge Funds Right About News Corp (NWSA)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards News Corp (NASDAQ:NWSA) and determine whether hedge funds skillfully traded this stock.

Is News Corp (NASDAQ:NWSA) a great investment now? Money managers were becoming more confident. The number of bullish hedge fund bets moved up by 2 recently. Our calculations also showed that NWSA 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). NWSA was in 28 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with NWSA holdings at the end of the previous quarter.

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

To most stock holders, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are more than 8000 funds in operation at present, Our researchers choose to focus on the leaders of this club, around 850 funds. These hedge fund managers administer most of the hedge fund industry’s total capital, and by shadowing their finest stock picks, Insider Monkey has discovered several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the latest hedge fund action encompassing News Corp (NASDAQ:NWSA).

What does smart money think about News Corp (NASDAQ:NWSA)?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the fourth quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in NWSA a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Yacktman Asset Management held the most valuable stake in News Corp (NASDAQ:NWSA), which was worth $194.2 million at the end of the third quarter. On the second spot was General Equity Partners which amassed $22 million worth of shares. AQR Capital Management, D E Shaw, and Contrarius Investment Management 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 General Equity Partners allocated the biggest weight to News Corp (NASDAQ:NWSA), around 14.37% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, earmarking 8.87 percent of its 13F equity portfolio to NWSA.

As one would reasonably expect, key hedge funds were breaking ground themselves. Contrarius Investment Management, managed by Stephen Mildenhall, established the largest position in News Corp (NASDAQ:NWSA). Contrarius Investment Management had $10.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $1.6 million position during the quarter. The other funds with brand new NWSA positions are Steve Cohen’s Point72 Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to News Corp (NASDAQ:NWSA). We will take a look at PRA Health Sciences Inc (NASDAQ:PRAH), Reinsurance Group of America Inc (NYSE:RGA), Vereit Inc (NYSE:VER), and Healthcare Trust Of America Inc (NYSE:HTA). This group of stocks’ market caps match NWSA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRAH 29 189694 -9
RGA 30 275843 3
VER 18 314967 -10
HTA 16 106529 5
Average 23.25 221758 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $297 million in NWSA’s case. Reinsurance Group of America Inc (NYSE:RGA) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 16 bullish hedge fund positions. News Corp (NASDAQ:NWSA) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NWSA as the stock returned 32.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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