Is NWSA Stock A Buy or Sell?
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:NWSA).
Is NWSA stock a buy? News Corp (NASDAQ:NWSA) has seen an increase in activity from the world's largest hedge funds of late. News Corp (NASDAQ:NWSA) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that NWSA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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' 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 124 percentage points since March 2017 (see the details here).
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we're going to take a look at the recent hedge fund action encompassing News Corp (NASDAQ:NWSA).
Do Hedge Funds Think NWSA Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in NWSA 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.
Among these funds, Yacktman Asset Management held the most valuable stake in News Corp (NASDAQ:NWSA), which was worth $385.2 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $96.4 million worth of shares. Arrowstreet Capital, 59 North Capital, and Balyasny 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 13.11% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, setting aside 8.23 percent of its 13F equity portfolio to NWSA.
As aggregate interest increased, specific money managers were leading the bulls' herd. 59 North Capital, managed by Michael Bilger, initiated the largest position in News Corp (NASDAQ:NWSA). 59 North Capital had $35.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $20.9 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, David Harding's Winton Capital Management, and Hoon Kim's Quantinno Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as News Corp (NASDAQ:NWSA) but similarly valued. We will take a look at Teva Pharmaceutical Industries Limited (NYSE:TEVA), Cna Financial Corporation (NYSE:CNA), News Corp (NASDAQ:NWS), Lennox International Inc. (NYSE:LII), Repligen Corporation (NASDAQ:RGEN), First Solar, Inc. (NASDAQ:FSLR), and Bright Horizons Family Solutions Inc (NYSE:BFAM). All of these stocks' market caps are closest to NWSA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEVA,26,916076,-7 CNA,16,60793,-1 NWS,11,65562,-3 LII,27,353035,-7 RGEN,37,1330745,2 FSLR,34,406430,-6 BFAM,20,308229,-6 Average,24.4,491553,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $492 million. That figure was $703 million in NWSA's case. Repligen Corporation (NASDAQ:RGEN) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 11 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 73.8. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on NWSA as the stock returned 49.5% since the end of Q4 (through 4/12) 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.
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