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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

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!