After reviewing the hedge fund filings for last quarter, there are five stocks that stood out as being loved by hedge funds. The hedge fund activity in these five stocks were flagged as “unusual” in the sense that they saw a number of major investors that have to disclose their holdings to the SEC quarterly upping their stakes in the company. A few are “under the radar” picks and lesser known to conventional investors, but worth checking out.
Williams Companies, Inc. (NYSE:WMB) is an energy infrastructure company in North America focused on natural gas and natural gas liquids. There are five hedge funds and major investors with Williams in its top ten (as measured by portfolio weighting). There were also twenty investors increasing their positions last quarter. The top hedge fund owner is Viking Global, who has 4.6% of its portfolio invested in the company. Also, the second and third hedge fund owners, Senator Investment and Corvex Capital, increased their stakes by over 150% each during the fourth quarter (see all the hedge funds owning Williams).
One draw to this company is that it can generate solid cash flow and dividend growth for investors. Earlier this year, Williams Companies, Inc. (NYSE:WMB) boosted its annual dividend payment 4.2% and it now yields 3.9%. Management has vowed to continue creating value for shareholders, which includes its commitment to grow its annual dividend by 20% over the next few years.
Following its 2012 spinoff of its exploration assets — WPX Energy — Williams Companies, Inc. (NYSE:WMB) is now a pure play midstream operator with assets ranging from Canadian oil sands to deepwater operations in the Gulf of Mexico. Its key market is natural gas, which I am positive on given the move toward alternative energies, including recent news that billionaire Warren Buffett’s BNSF might be looking to use natural gas to power its railcars.
Advance Auto Parts, Inc. (NYSE:AAP)
is one of the largest auto parts retailers in the U.S. Advance had five major investors with the company in its top ten, and seventeen investors upping their stakes. Some of Advance’s recent initiatives to differentiate itself from other auto parts retailers includes store remodeling and nationwide advertising campaigns.
Advance is also one of the cheapest auto parts retailers in the industry.
Advance Auto Parts 0.93x
Advance Auto Parts 10x
Valeant Pharmaceuticals Intl Inc (NYSE:VRX)
is a specialty drug maker, a combination of the 2010 merger of Valeant Pharmaceuticals and Biovail, then the 2012 acquisition of Medicis Pharmaceutical. The Medicis deal is expected to generate synergies and be accretive to 2013 earnings.
This pharma company had six major investors with the company in its top ten. A few notable hedge fund owners include ValueAct, which had 13.3% of its portfolio invested in the company and owned 17.5 million shares. As well, Janus Capital owned 3.8 million shares and Iridian Asset 3.5 million.
One intriguing aspect is the drug company’s diversified revenue portfolio. The company has five segments: U.S. neurology, U.S. dermatology, Canada and Australia, branded generics in Europe, and branded generics in Latin America.
Starbucks Corporation (NASDAQ:SBUX) is the coffee giant, and another of the popular stocks among hedge funds last quarter. There were nineteen major investors upping their stake last quarter, and five had the coffee company in their top ten. The largest hedge fund owner is billionaire Steve Cohen of SAC Capital, this after upping his stake 124% last quarter. Jim Simons and RenTech also took a new position last quarter.
Investors have taken notice of the historically low coffee prices, assuming that it will bode well for the company’s operating performance, yet, Starbucks has the ability to keep its operating margin high regardless of coffee prices (read how here).
Other items lifting the stock have been solid earnings results; last quarter, Starbucks Corporation (NASDAQ:SBUX) managed to post EPS results of $0.57, versus $0.50 for the same quarter last year. This was on the back of global same store sales growth of 6% year over year.
Despite being one of the most recognized names in the coffee industry, the company is also focusing on “alternative” beverages with the 2011 purchase of Evolution Fresh and another key move could be Starbucks Corporation (NASDAQ:SBUX)’ purchase of Jamba Juice (read more here).
Barrick Gold Corporation (USA) (NYSE:ABX)
was another popular stock among hedge funds last quarter, despite the fourth quarter decline in gold prices…