The most comprehensive picture of what hedge funds own comes in the form of quarterly 13F filings with the SEC, and these filings provide the core of the information we use to develop investment strategies. For example, our research shows that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) and our own portfolio based on these techniques outperformed the S&P 500 by 33 percentage points in the last 11 months. We can also get more up to date information about large hedge fund buys in small-cap and mid-cap stocks (as well as the occasional large cap) from 13D and 13G filings, filed whenever a fund buys over 5% of a company’s total shares outstanding. Here are five stocks which hedge funds have reported buying recently:
Billionaire Stephen Mandel’s Lone Pine Capital has reported a position of over 10 million shares in Michael Kors Holdings Ltd (NYSE:KORS), or just over 5% of the company; this is up from about 8.1 million shares as of the beginning of April (see more of Mandel’s stock picks). The apparel and accessories company is a growth monster: revenue was up over 50% in its fiscal Q1 (which ended in June) versus a year earlier, with net income rising over 80%. Markets have already priced in high growth, with a trailing P/E of 33, but forecasts from Wall Street analysts place the five-year PEG ratio right about at 1.
Perry Capital, managed by billionaire Richard Perry, has made a move into the brewing battle at J.C. Penney Company, Inc. (NYSE:JCP) as Perry and fellow billionaire Bill Ackman of Pershing Square are apparently in agreement that the troubled department store should find a new CEO soon and replace the chairman of the Board. Check out more stocks Perry likes. The fund now owns over 7% of the retailer, which is expected to be unprofitable both this year and next year. With revenue falling over 10% from its levels a year ago, J.C. Penney Company, Inc. (NYSE:JCP) has drawn considerable attention from short sellers with 29% of the float held short.
SAC Capital Advisors recently disclosed ownership of 3.9 million shares of Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), an owner of television stations which recently completed its acquisition of Fisher Communications. SAC is managed by billionaire Steve Cohen and his team (find Cohen’s favorite stocks). Higher costs and interest expenses have offset revenue growth at Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) in recent quarters, though in part due to this acquisition the sell-side seems to expect improvement next year. Specifically, analysts are forecasting $2.69 in EPS- resulting in a forward P/E of 9- though we would be a bit concerned about integration risk.