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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding News Corp (NASDAQ:NWS).
News Corp (NASDAQ:NWS) was in 21 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. NWS has experienced an increase in hedge fund interest of late. There were 11 hedge funds in our database with NWS positions at the end of the fourth quarter. Our calculations also showed that NWS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the 21st century investor’s toolkit there are a large number of formulas investors have at their disposal to analyze stocks. A duo of the most useful formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top money managers can beat the broader indices by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Donald Yacktman of Yacktman Asset Management
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Do Hedge Funds Think NWS Is A Good Stock To Buy Now?
At Q1's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 91% from the fourth quarter of 2020. By comparison, 13 hedge funds held shares or bullish call options in NWS a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in News Corp (NASDAQ:NWS) was held by Arrowstreet Capital, which reported holding $47 million worth of stock at the end of December. It was followed by CQS Cayman LP with a $24.8 million position. Other investors bullish on the company included Echo Street Capital Management, Becker Drapkin Management, and Yacktman Asset Management. In terms of the portfolio weights assigned to each position Becker Drapkin Management allocated the biggest weight to News Corp (NASDAQ:NWS), around 4.24% of its 13F portfolio. CQS Cayman LP is also relatively very bullish on the stock, designating 1.55 percent of its 13F equity portfolio to NWS.
As aggregate interest increased, key hedge funds were leading the bulls' herd. CQS Cayman LP, managed by Michael Hintze, initiated the most outsized position in News Corp (NASDAQ:NWS). CQS Cayman LP had $24.8 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also made a $21.1 million investment in the stock during the quarter. The other funds with brand new NWS positions are Matthew Drapkin and Steven R. Becker's Becker Drapkin Management, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Nathaniel August's Mangrove Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as News Corp (NASDAQ:NWS) but similarly valued. We will take a look at News Corp (NASDAQ:NWSA), Charles River Laboratories International Inc. (NYSE:CRL), Wynn Resorts, Limited (NASDAQ:WYNN), ABIOMED, Inc. (NASDAQ:ABMD), PerkinElmer, Inc. (NYSE:PKI), FMC Corporation (NYSE:FMC), and Domino's Pizza, Inc. (NYSE:DPZ). All of these stocks' market caps are closest to NWS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWSA,35,1235000,3 CRL,42,1118745,-1 WYNN,49,1074268,-3 ABMD,26,1003000,3 PKI,33,1748962,2 FMC,32,499555,-13 DPZ,29,2176091,-8 Average,35.1,1265089,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $1265 million. That figure was $168 million in NWS's case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand ABIOMED, Inc. (NASDAQ:ABMD) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks News Corp (NASDAQ:NWS) is even less popular than ABMD. Our overall hedge fund sentiment score for NWS is 40. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards NWS. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market again by 7.7 percentage points. Unfortunately NWS wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); NWS investors were disappointed as the stock returned -2% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.