News Corp. appeared to be on many mutual funds' “sell” lists between April and June. Gordon Crawford's Capital Research sold 5.1 million shares of Rupert Murdoch's media conglomerate in the second quarter, trimming its holdings to 50.5 million shares. Cap Research had held 80 million News Corp. shares in 2007.
FMR LLC and Janus Capital Management also unloaded large blocks of shares in News Corp., which struggled in the second quarter, losing 22% or $4.50 off its stock price (which opened Aug. 27 at $14.06) amid fears of a declining advertising market.
Fundamentally, News Corp. has performed well: Operating income at its cable networks, for example, was up 10.2% in the fiscal fourth quarter and revenue rose 26.5%. But Miller Tabak media analyst David Joyce said Murdoch's company is being punished for an aggressive stance in what some perceive to be no-growth industries.
“It's more of the macro market issues that are punishing News Corp., rather than its fundamentals,” Joyce said. “The minority shareholder discount widens when the market is more nervous. It's tough to quantify, but that's when people focus more on the negatives.”
Those negatives include its $5 billion acquisition of Dow Jones — publisher of The Wall Street Journal — last year and its continued investment in newspapers.
Joyce said that the somewhat divergent buying and selling strategies of the funds are likely more a factor of the current state of the economy than any change in focus.
“It's the nature of the beast. These big funds need to try to get performance and you do that by buying something low before it turns around,” Joyce said.