Funds Cut Stake In Scripps Networks In Past 9 Months


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After an investor checks a stock's fundamentals and chart, one other item can set off an alarm.

If you're guessing market direction, a strong industry group or sector, those are all true. But today let's focus on an often-overlooked item: institutional support.

You may think you've found the greatest stock in the world, but if fund managers disagree, your opinion won't matter. Big money owns the game, and if funds aren't backing a stock, you too should back off.

This is especially true if the stock doesn't appear to have support from well-respected fund managers. You want big money behind the stock, but you want smart big money, not dumb big money.

Dumb money will often move into a stock as smart money is leaving. Or as the great military strategist Gen. Douglas MacArthur once said, failure can often be summed up in two words -- "too late."

ConsiderScripps Networks Interactive ( SNI ) . The company owns the Food Network, Travel Channel and Food Channel.

Scripps Networks is the result of a 2007 move that split the national television networks away from the old media newspapers and local TV stations which now trade asE.W. Scripps ( SSP ).

E.W. Scripps has a middle-of-the-pack Composite Rating of 54 and a worst-possible Sales + Profit Margins + ROE of E.

Scripps Networks has a 98 Composite Rating and a best-possible SMR of A.

Earnings for Scripps Networks rose 36% and 20% in the past two years. The Street expects 14% EPS growth this year.

Last year, operating cash flow per share was an impressive 129% above earnings per share. The dividend payout has increased 60% since the split-off company began paying dividends in August 2008. The current annualized yield is 0.9%.

These numbers aren't bad, but the fund-support picture might cause disciplined investors to think twice before buying shares. In the past nine months, more funds have moved into the stock (651 up from 637) but the overall stake fell 23%. And in the first half of this year, Fidelity Contrafund reduced its stake from 2.8 million shares to zero.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: SNI , SSP

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