The most complete picture of what hedge funds and other major investors own comes in the form of 13F filings, but the drawback to this information is that it tends to be months old before it is released. More up-to-date information comes in the form of 13D and 13G filings; the drawback to these is that they are only filed when a fund takes or changes a large percentage stake. This is not particularly common, and extremely rare among large cap stocks. However, we think that reviewing these filings can still serve as a list of suggestions that investors can then review further. Here are five stocks that hedge funds and other institutional investors have recently reported buying:
Tiger Cub Robert Karr and his team at Joho Capital filed with the SEC to disclose ownership of almost 1 million shares of Yelp Inc (NASDAQ:YELP). 60% of Yelp’s outstanding shares are held short, and some insiders have been selling (see a history of insider sales at Yelp); while these aren’t necessarily strong points for bears, they are concerning. Wall Street analyst consensus is for only 2 cents per share in earnings for Yelp in 2013, and the core business may receive additional competition from Facebook Inc (NASDAQ:FB)’s new Social Graph feature in the sense that it will allow Facebook users to see their connections’ favorite local businesses (which may be more trusted than a consensus of strangers).
Billionaire Ken Griffin’s Citadel Investment Group owns over 5% of Express, Inc. (NYSE:EXPR) after reporting a position of 4.8 million shares. This is up from 1.4 million shares in the fund’s portfolio at the end of September (find Griffin’s favorite stocks). The stock has rebounded from its lows, however, and has risen 22% so far this year; Citadel has likely already made a substantial profit on its investment. Express trades at 12 times trailing earnings, but same-store sales were down considerably in its most recent quarter versus a year earlier and net income fell 47%. The five-year PEG ratio is 0.6 as Wall Street analysts are optimistic about the future.
Read on for more picks including Dreamworks:
Starboard Value, an activist fund managed by Jeffrey Smith, has taken a large position in Calgon Carbon Corporation (NYSE:CCC) and has nominated three members to the Board of Directors. Our analysis is that this is now one of Starboard’s largest stock positions (see more of Starboard’s top stock picks). Even adding back a restructuring charge, Calgon’s operating income in its most recent quarterly report was quite low and earnings multiples are high. We don’t want to blindly follow Smith, and any investors seem to be dependent on Starboard improving value creation, so we think that it is better to watch for further action rather than buying.
Murray Stahl’s Horizon Kinetics (research more stocks Horizon Kinetics owns) increased its stake in Dreamworks Animation Skg Inc (NASDAQ:DWA) to a total of 9.1 million shares, giving the fund ownership of almost 12% of the company. Business at Dreamworks has been down recently though it would be expected that a film studio’s financials would vary dramatically from year to year. 40% of the outstanding shares are held short and when we looked at the company we thought that it may be better to buy peers in the entertainment industry such as Disney (NYSE:DIS). Read more about Dreamworks including its upcoming releases and comparisons to its peers.
Sun Hydraulics Corporation (NASDAQ:SNHY) had Royce & Associates report that it owned 1.8 million shares of the company after buying additional shares. That fund is managed by Chuck Royce (check out more stocks Royce has been buying). While the company had done well in the first half of 2012, revenue and earnings growth turned negative in Q3 and so we are worried that the industrial equipment company may continue to deliver poorer numbers. Sun Hydraulics has earnings multiples of around 20- it does have a considerable amount of cash, but the EV/EBITDA multiple still comes out to 10x- and so we would avoid the stock.
Disclosure: I own no shares of any stocks mentioned in this article.
