Hedge Funds Bought Zillow, DaVita, and More

CITADEL INVESTMENT GROUPWhile the most complete information about hedge fund ownership comes from 13F filings, this data only comes out six to seven weeks after the end of every quarter meaning that it might not be quite up to date by the time it is released to the public. 13D and 13G filings, however, are filed relatively quickly after a hedge fund or other major investor buys up 5% of a company’s outstanding shares (or when it makes changes to a large position). As a result while they don’t provide as complete a picture of what hedge funds are buying (for example, even a large buy in a megacap stock will almost never get a fund to the 5% threshold), investors can still see some of the stocks that top investors are buying and decide if each company is worth doing further research. Here are four recent buys:

Billionaire Ken Griffin’s Citadel Investment Group has reported a position of 1.6 million shares in Zillow Inc (NASDAQ:Z), a real estate sales and rentals website. Citadel’s 13F for the end of September had given the fund’s ownership at about 440,000 shares (check out more of billionaire Ken Griffin’s stock picks), so we can see that Griffin and his team have increased their stake by about 300% in the last two months. The market sees Zillow as a high growth stock: it trades at 50 times consensus earnings for 2013, and that figure includes substantial earnings growth from this year. The company recently revised its revenue guidance downward for the fourth quarter of the year, which had caused its stock price to drop from about $37 to below $24. The stock has recovered a bit since then, to about $27 per share. Zillow has been very acquisitive, recently purchasing rentals information website HotPads to continue a pattern of acquisitions from earlier in the year. There are also concerns about how sustainable its business model is, including suggestions that realtors aren’t viewing it as a valuable tool. We’d avoid the stock.

Berkshire Hathaway has been adding shares of DaVita HealthCare Partners Inc (NYSE:DVA) and now owns nearly 13 million shares, up from a little over 10 million two months ago. It looks to us like the dialysis services provider is getting close to being one of the ten largest holdings in Warren Buffett’s portfolio if it isn’t already (see Warren Buffett’s top stock picks). At a $10 billion market capitalization, DaVita trades at 19 times trailing earnings. In its most recent quarter, it reported that revenue had increased 12% and net income had grown 7% compared to the third quarter of 2011. Buffett’s continued interest is enough to make us consider the stock, though we would like to see a path to a higher growth rate at that multiple.

Marcato Capital, which is run by former Pershing Square employee Richard McGuire, increased its holdings of restaurant company DineEquity Inc (NYSE:DIN), which owns Applebee’s and IHOP, to over 1 million shares. At the beginning of October the fund had owned about 770,000 shares (find more stocks that Marcato owned). DineEquity trades at 15 times forward earnings estimates, which represents a small premium over peer table-service restaurant companies such as Brinker International, Inc. (NYSE:EAT) and Darden Restaurants, Inc. (NYSE:DRI); these two stocks carry forward P/Es of 11 and 12, respectively. Alternatively, DineEquity trades even with McDonald’s Corporation (NYSE:MCD) on a forward earnings basis even though that company has a much stronger brand and quick service restaurants are expected to see better growth in the next several years. As a result we’d consider any of those three stocks better buys. Read more analysis of DineEquity.

Coliseum Capital Management, which had already been a major investor in $340 million market cap home health care provider LHC Group, Inc. (NASDAQ:LHCG), added about 100,000 shares to its position in the company in late November. LHC had been Coliseum’s largest 13F holding by market value at the end of the third quarter, with 2.2 million shares; it’s now getting close to 2.4 million, and co-manager Christopher Shackelton has joined LHC’s Board of Directors. See more of Coliseum’s favorite stocks. LHC trades at 13 times earnings, and we think that the industry has good growth potential thanks to demographics.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!