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Where Do Hedge Funds Stand On News Corp (NWSA)?

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  • NWSA

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards News Corp (NASDAQ:NWSA).

Is News Corp (NASDAQ:NWSA) ready to rally soon? The smart money was becoming more confident. The number of bullish hedge fund bets rose by 3 recently. News Corp (NASDAQ:NWSA) was in 35 hedge funds' portfolios at the end of March. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NWSA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a peek at the key hedge fund action encompassing News Corp (NASDAQ:NWSA).

Do Hedge Funds Think NWSA Is A Good Stock To Buy Now?

At the end of March, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NWSA over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Yacktman Asset Management was the largest shareholder of News Corp (NASDAQ:NWSA), with a stake worth $414.5 million reported as of the end of March. Trailing Yacktman Asset Management was Citadel Investment Group, which amassed a stake valued at $169.5 million. Arrowstreet Capital, Darsana Capital Partners, and Scopus Asset 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 59 North Capital allocated the biggest weight to News Corp (NASDAQ:NWSA), around 8.16% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, setting aside 5.06 percent of its 13F equity portfolio to NWSA.

Consequently, key money managers were breaking ground themselves. Darsana Capital Partners, managed by Anand Desai, established the biggest position in News Corp (NASDAQ:NWSA). Darsana Capital Partners had $127.2 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also initiated a $89 million position during the quarter. The other funds with new positions in the stock are Scott Ferguson's Sachem Head Capital, Ben Gordon's Blue Grotto Capital, and Brad Stephens's Six Columns Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as News Corp (NASDAQ:NWSA) but similarly valued. These stocks are Charles River Laboratories International Inc. (NYSE:CRL), Wynn Resorts, Limited (NASDAQ:WYNN), ABIOMED, Inc. (NASDAQ:ABMD), PerkinElmer, Inc. (NYSE:PKI), FMC Corporation (NYSE:FMC), Domino's Pizza, Inc. (NYSE:DPZ), and Fair Isaac Corporation (NYSE:FICO). This group of stocks' market values resemble NWSA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRL,42,1118745,-1 WYNN,49,1074268,-3 ABMD,26,1003000,3 PKI,33,1748962,2 FMC,32,499555,-13 DPZ,29,2176091,-8 FICO,27,1355293,-11 Average,34,1282273,-4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1282 million. That figure was $1235 million in NWSA'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. News Corp (NASDAQ:NWSA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NWSA is 57.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately NWSA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NWSA were disappointed as the stock returned 1.2% since the end of March (through 6/25) 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 many of these stocks already outperformed the market since 2019.

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