We track 13D and 13G filings by hedge funds and other notable investors because the trades reported in these filings are generally very fresh; we know that the stock has been bought in the last week or two, making it more likely that the fund’s bullishness is still relevant for current investors. Unfortunately, the nature of filing requirements mean that filings are concentrated among small-cap and mid-cap stocks, though arguably it is particularly important to see what hedge funds and their research teams think of these generally less well covered names. Here are five stocks that hedge funds have been buying:
Billionaire Ken Griffin’s Citadel Investment Group (check out Griffin’s favorite stocks) reported a position of 5.5 million shares in Take-Two Interactive Software, Inc. (NASDAQ:TTWO), the publisher of the Grand Theft Auto series among other video and PC game titles. This gives Citadel 6% of the outstanding shares. Take-Two is also notable as a stock that billionaire activist investor Carl Icahn has been buying recently (learn more about Icahn’s move back into Take-Two and find more stocks Icahn likes). The stock trades at five times forward earnings estimates, a discount to peers Electronic Arts Inc. (NASDAQ:EA) and Activision Blizzard, Inc. (NASDAQ:ATVI); however, the company is likely to see a temporary earnings boost in that period from the release of the next Grand Theft Auto game and it is actually currently unprofitable.
Buffalo Wild Wings (NASDAQ:BWLD) had SAC Capital Advisors- a hedge fund managed by billionaire Steve Cohen- report that it owned about 930,000 shares in a 13G filed with the SEC. Essentially all of these shares were bought in the fourth quarter of 2012. Higher chicken prices hurt Buffalo Wild Wings’ margins in the third quarter, and so net income was down; revenue was up, but that was mostly due to the opening of new locations. At a trailing P/E of 25, the stock trades fairly closely to hot restaurants such as Chipotle Mexican Grill, Inc. (NYSE:CMG). Buffalo Wild Wings was one of the most popular restaurant stocks among hedge funds in the third quarter.
A number of hedge funds are engaged in an activist campaign against SandRidge Energy Inc. (NYSE:SD), but Prem Watsa, “the Warren Buffett of Canada” as he is called, is in management’s corner. His Fairfax Financial Holdings, which owned less than 5 million shares at the beginning of October according to its 13F filing, now owns about 30 million shares of the natural gas producer. 16% of the outstanding shares of SandRidge are held short, so there’s some dissatisfied traders other than the activists; in addition, the company is not expected to be profitable next year. Read more about SandRidge’s issues and research more stocks Fairfax owns.