5 Stocks Hedge Funds Are Buying Like Crazy

FAIRHOLME (FAIRX)Hedge funds disclosed their first quarter holdings a couple of weeks ago. There has been significant media interest in the most popular stocks among hedge funds. Actually the rankings didn’t change compared to the end of 2011. Apple (AAPL) was still the most popular stock, followed by Google (GOOG) and Microsoft (MSFT) (see the 10 most popular stocks among hedge funds). Contrary to popular view, long/short equity hedge funds don’t trade very frequently. Apple and Microsoft have been among the top three most popular stocks since at least the end of 2010. Investors would have profited handsomely if they have bought these stocks in early 2011.

In this article we are going to take a closer look at stocks that experienced a significant amount of hedge fund interest recently. Some of these stocks have the potential to become hedge fund darlings over the next 6 months.

Illumina (ILMN) The stock was trading above $35 in February before it received an offer from Roche Holdings AG. The stock jumped above $50 after the announcement and that’s probably when hedge funds bought in. There were 17 hedge funds with ILMN positions at the end of December. That number stood at 49 on March 31st. Unfortunately Roche’s tender offer expired and Illumina currently trades around $44. Hedge funds probably lost more than 10% on this trade. James Dinan and Andreas Halvorsen are among the hedge fund managers that bet more than $100 million on this stock.

American International Group (AIG) is a candidate to become a hedge fund darling. There were 45 hedge funds at the end of March, vs. 21 hedge funds in December. Bruce Berkowitz has been a long-time AIG investor. His total position in AIG approached $3 billion at the end of March. Robert Pitts’ Steadfast Capital, Steve Cohen’s SAC Capital, and Leon Cooperman’s Omega Advisors initiated new bullish positions in the stock. Government still owns the majority of AIG shares and investors expect government to sell its shares at around $29 which is the break-even price for US Treasury. This creates an overhang and keeps investors away. As the government winds down its stake, we believe AIG could trade above $50 over the next 24 months.

Zynga Inc (ZNGA) There were only three hedge funds with Zynga shares at the end of December. However, hedge funds flocked into Zynga during the first quarter as the stock climbed to $15 from its IPO price of $10 in mid-December. By the end of March there were 24 hedge funds with a total investment of $234 million in ZNGA. Unfortunately the stock lost more than 50% since the end of the first quarter. Christopher Medlock James, Ken Griffin, and Anand Parekh’s hedge funds are among the losers.

Regions Financial ( RF) There were 24 hedge funds in RF at the end of December. That number jumped to 41 by the end of March. Regions Financial sold its brokerage and investment banking subsidiary, Morgan Keegan, for a total of $1.2 billion including the $250 million dividend received. The proceeds were used in the repayment of RF’s $3.4 billion TARP obligation. Hedge funds probably predicted that these transactions would act as a catalyst and RF’s stock price react positively. They were right, RF gained more than 50% during the first quarter. We think the opportunity to invest in RF is gone. Israel Englander, George Soros, and Jeffrey Altman initiated new positions in the stock during the first quarter and profited handsomely (see George Soros’ stock picks).

Equinix (EQIX) is another stock with 50+% return during the first quarter. Philippe Laffont invested nearly $600 million in the stock during the first quarter. He presented his investment thesis in Equinix at the Ira Sohn Conference. He said Equinix could reach $500 over the next few years. Currently the stock trades around $160. Laffont isn’t the only hedge fund manager who got bullish about the stock recently. Billionaires Jim Simons and Thomas Steyer also initiated new positions in this stock.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

The 10 Most Dangerous States to be a Cop

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!