Mutual funds increased positions in Liberty Global in the second quarter, as several added more than 1 million shares of the John Malone-led international cable giant while shedding more traditional U.S. cable operators, including Comcast.
Three of the top five media mutual funds — Janus Capital, FMR and Capital Research Global Investors — each bought more than 1 million shares of Liberty Global during the period, according to their quarterly statements filed with the Securities and Exchange Commission. FMR, parent of the Fidelity family of funds, added 2.4 million shares of Liberty Global, boosting its total holdings in the company to 24.4 million shares. Janus added 1.4 million shares and Capital Research bought 1.9 million shares.
CONSOLIDATION PLAYER
Liberty Global has been an aggressive player in European consolidation. It bought the remaining interest in Dutch cable operator Ziggo in January and had been a rumored target of European wireless giant Vodafone in the first quarter. The operator has also been pursuing MVNO agreements with wireless carriers across Europe to assemble a quad-play offering of video, voice, data and cellphone service for its customers.
Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak notes that despite increased capital investments in the U.K., Liberty Global still is expected to throw off sizable free cash flow, which should drive share repurchases that will only help the stock price.
“This is all enhanced by potential upside potential from M&A (with Vodafone and possibly AT&T’s DTV Latin American asset as a reasonable acquisition candidates),” he said in a research note. Liberty Global, at 8.5 times 2016 estimated cash flow, still has an attractive valuation, he said.
While funds were buying Liberty Global, all five funds were selling large positions in Comcast, the biggest cable operator in the U.S., including early backer Janus.
Comcast abandoned its agreement to purchase Time Warner Cable in April, which resulted in a temporary decline in its stock price, which could have spurred the sell-off.
Time Warner Cable was more popular with hedge funds. According to CBS Marketwatch, using data from Whalewisdom.com, TWC was one of the most popular stocks among hedge-fund managers in the second quarter, with 7.7% of 196 firms they track taking new interests in the company during the period. TWC also was the most popular stock eliminated from hedge fund portfolios, with about 6.6% of those firms cutting TWC from their portfolios during the period.
Consolidation expectations may have attracted two big-name hedge-fund gurus to the sector — Soros Capital Management head George Soros and Berkshire Hathaway’s Warren Buffett. Soros, who made billions speculating against currency in the 1990s, added about 1.45 million shares of TWC in the second quarter, according to SEC filings. It was his single largest buy during the period.
Buffett seemed to be putting more faith in distribution than programming in the second quarter, as his Berkshire Hathaway bought more than 2.5 million shares of Charter Communications and sold more than 2.6 million shares of Viacom, securities filings show.
Berkshire disclosed that it ended the second quarter with 8.5 million shares of Charter, up from the 6 million shares it owned on March 31.
Buying Low
Some of the top media institutional investors beefed up their positions in Liberty Global and telecom stocks in the second quarter.
Janus Capital Management
Liberty Global: 1.4 million
Walt Disney Co.: 457,793
BlackRock Advisors
Verizon: 1.3 million
AT&T: 737,680
Viacom: 279,993
FMR LLC
AT&T: 15.3 million
Disney: 6.2 million
Liberty Interactive: 2.7 million
Liberty Global: 2.4 million
Capital Research & Management
Verizon: 3.3 million
Liberty Global: 1.9 million
Capital World Investors
Nielsen: 5.3 million
AT&T: 2.975 million
21st Century Fox: 614,615
Selling High
Major media institutions focused their second-quarter activity on reducing their holdings in some big names.
Janus Capital Management
21st Century Fox: -8.96 million
Comcast A: -4.4 million
CBS: -4.3 million
BlackRock Institutional Trust
Comcast Special Common (K): -6.5 million
Comcast (A): -3.7 million
Cablevision Systems: -1.4 million
FMR
Comcast (A): -16.2 million
Verizon: -8.3 million
Comcast Special (K): -3.5 million
Capital Research Global Investors
Comcast (A): -8.7 million
Comcast Special (K): -6.5 million
DirecTV: -2.9 million
State Street
21st Century Fox: -11.9 million
AT&T: -10.3 million
Comcast (A): -6.6 million
SOURCE : SEC filings, Multichannel News research
