We like to track hedge fund activity and use the stocks that funds and other notable investors are buying as a screen for potential stock picks. When these market players take (or change) a large position, they must file a 13D or 13G with the SEC, which allows us to see their trade within a few days of completing it. Here are five stocks that hedge funds have been buying recently:
Billionaire Steven Cohen’s SAC Capital Advisors, which had also bought shares of Plains Exploration & Production Company (NYSE:PXP) during the second quarter of the year, reported a position of 6.5 million shares of the company in its filing. This is a particularly interesting transaction because Plains had recently agreed to a deal in which it purchased offshore oil acreage from BP and Shell and will cover the loan it took out for the purchase by selling some of its shale gas assets. Essentially, the company has completely changed its emphasis in the oil and gas space and SAC apparently thinks that its decision will create shareholder value. Read more about Plains and SAC's investment.
Sodastream International Ltd (NASDAQ:SODA) is a fast-growing company which sells appliances and related supplies which allow consumers to make their own soda. Eric Bannasch’s Cadian Capital is apparently pretty excited by the 40-50% growth rates of revenue and earnings that the company reported in the second quarter compared to the same period in 2011: it now owns 2 million shares, just over 10% of the total number of shares outstanding. Learn more about Cadian's purchase of Sodastream stock. However, with 58% of shares outstanding held short, a number of market participants are taking the other side of this trade.
Luxor Capital, managed by Christian Leone, reported a position of 6.5 million shares in Tripadvisor Inc (NASDAQ:TRIP); this was up from the 3 million shares that the fund had reported at the end of June (read more about Luxor and Tripadvisor). Tripadvisor, an online review company which was spun out from travel bookings site Expedia, is up 33% since it became an independent company. It trades at 25 times trailing earnings and 18 times forward earnings estimates; these numbers are a bit high, but the entire travel website industry is experiencing strong growth which is resulting in earnings multiples in the 20 range.
Prem Watsa’s Fairfax Financial Holdings increased its stake in Resolute Forest Products Inc (NYSE:RFP) to 22.4 million shares. “The Warren Buffett of Canada” and Fairfax had owned 18.5 million shares at the end of June; the most recent increase gives them 22% of the outstanding shares. However, short sellers are also excited about the newsprint and paper company and short interest in Resolute is quite high. The forward P/E multiple of 13 is not particularly high, but there are a number of reasonable concerns about the potential decline of the industry as newspaper and magazine circulation falls.
Scopia Capital owns about 11% of mortgage and fleet management company PHH Corporation (NYSE:PHH) after buying enough shares to give it a total of 6.3 million. PHH has almost doubled in price since the beginning of the year, with net income that was up in the first half of 2012 compared to the same period last year and investors becoming less concerned that its mortgage business is a major risk for the company. It carries a P/B of 0.8, meaning that it trades at a small discount to the book value of its equity.
We’ve been hearing good things about the real estate market, but still are hesitant to buy a company with such a large concentration on mortgages; we haven’t been hearing good things about the newsprint market, and so we won’t be joining Fairfax in Resolute either. Plains would actually be the company we’d most be interested in looking at, though we’d need to be satisfied that oil prices would increase enough in the next few years to make deepwater Gulf drilling reasonably profitable.