Large media mutual funds appeared to be taking advantage of low-priced stocks and making bets on an improved advertising environment in the third quarter, beefing up on shares of CBS (NYSE: CBS) and News Corp (NYSE: NWS). while reducing their positions in distributors like Comcast (NSDQ: CMCSA) and Verizon Communications.

According to Securities and Exchange Commission filings over the past few weeks, the four largest mutual funds focusing on the cable space — Capital Research Global Investors, Capital Guardian Trust, Janus Capital Management and FMR LLC — focused on snapping up cheap stocks like CBS (which traded as low as $5.78 per share in July) and News Corp. (which traded around $9.47 per share in July) as well as strong performers such as Discovery Communications (NSDQ: DISCA) (which has had three straight quarters of advertising-revenue growth).

Those stocks were trading near their low points for the year in early July, but rallied in the latter part of the quarter. If they bought in early, those funds likely made a killing. For example, CBS, trading at $5.78 in July, more than doubled to $12.05 per share by Sept. 30 and the stock closed at $13.73 each on Nov. 18. The broadcaster, which owns cable networks Showtime and College Sports Network, has been making noise recently on the retransmission-consent front, claiming it will double its retrans take in 2010. In the same timeframe, News Corp. rallied from $9.47 on July 7 to $14.44 on Sept. 22, a 52% gain. Read more on Multichannel.