Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. Trends reversed 180 degrees during the first quarter amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the first quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Fox Corporation (NASDAQ:FOX).
Fox Corporation (NASDAQ:FOX) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that fox isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Let's take a gander at the recent hedge fund action surrounding Fox Corporation (NASDAQ:FOX).
What have hedge funds been doing with Fox Corporation (NASDAQ:FOX)?
At the end of the first quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards FOX over the last 15 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Eagle Capital Management held the most valuable stake in Fox Corporation (NASDAQ:FOX), which was worth $278.7 million at the end of the first quarter. On the second spot was Yacktman Asset Management which amassed $250.5 million worth of shares. Moreover, Baupost Group, Farallon Capital, and Samlyn Capital were also bullish on Fox Corporation (NASDAQ:FOX), allocating a large percentage of their portfolios to this stock.
Seeing as Fox Corporation (NASDAQ:FOX) has faced a decline in interest from the smart money, it's easy to see that there exists a select few hedgies who sold off their full holdings by the end of the third quarter. Intriguingly, Boykin Curry's Eagle Capital Management said goodbye to the largest investment of the 700 funds tracked by Insider Monkey, worth an estimated $1204.7 million in stock. Donald Yacktman's fund, Yacktman Asset Management, also dropped its stock, about $1031.5 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fox Corporation (NASDAQ:FOX) but similarly valued. We will take a look at Eversource Energy (NYSE:ES), SBA Communications Corporation (NASDAQ:SBAC), McKesson Corporation (NYSE:MCK), and Realty Income Corporation (NYSE:O). All of these stocks' market caps resemble FOX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ES,16,403030,-4 SBAC,29,1658761,-3 MCK,32,1989051,-12 O,15,175737,-3 Average,23,1056645,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $1057 million. That figure was $1344 million in FOX's case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Fox Corporation (NASDAQ:FOX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FOX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FOX were disappointed as the stock returned -2.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.