The most up-to-date picture on what hedge funds are buying and selling- though it tends to be somewhat limited- comes in the form of 13D and 13G filings with the SEC. These filings occur once a hedge fund or other major investor buys more than 5% of a company’s outstanding shares (and when it adds to or sells out of that position). Here are five stocks that hedge funds have been buying recently:
Billionaire Ken Griffin’s Citadel Investment Group reported owning 6.3% of the outstanding shares of Abercrombie & Fitch Co. (NYSE:ANF). The 5.2 million shares that Citadel owned represented a large increase from the relatively small position the fund had at the end of September (find more of billionaire Ken Fisher’s stock picks from the end of Q3), so Citadel seems to have been buying heavily as the stock has rallied in the recent past. Abercrombie & Fitch’s trailing P/E looks high at 34, though in its most recent quarter earnings were up 41% from the third quarter of 2011. Our analysis of Abercrombie & Fitch concluded that its valuation was not that out of place compared to most of its peers, though larger retailer The Gap Inc. (NYSE:GPS) might be a better value. Abercrombie & Fitch had been one of hedge funds’ top small cap picks in the second quarter of the year.
JANA Partners, a value hedge fund managed by Barry Rosenstein, has been campaigning for a breakup of fertilizer wholesaler and retailer Agrium Inc. (NYSE:AGU) and it recently reported that it had further increased its stake in the company to 9.2 million shares. JANA had owned 7.3 million shares of the stock at the beginning of October (see more of Rosenstein’s stock picks). Breakup opportunities are similar to spinouts in that management of the new companies can focus more closely on improving their particular businesses (read more about why hedge funds like spinouts). Currently, Agrium trades at 12 times trailing earnings.
Over 8% of the outstanding shares of $2.7 billion market cap hospital company Community Health Systems (NYSE:CYH) are owned by Glenview Capital per a 13G filed earlier in November. Glenview, which is managed by former Omega Advisors trader Larry Robbins, owned 7.6 million shares; this was up from 1.6 million at the end of September (see more stocks that Glenview owned at that time). When we reviewed the fund’s 13F, we noted that it had also owned shares in market leader HCA Holdings Inc (NYSE:HCA), which has similar multiples to Community Health Systems and whose business has been performing slightly better recently.
Dmitry Balyasny’s Balyasny Asset Management had been buying shares of Walter Energy, Inc. (NYSE:WLT) during the third quarter and continued purchases since the beginning of October have given the fund a position of 3.4 million shares- over 5% of the total shares outstanding. Walter primarily provides metallurgical coal to steel producers such as United States Steel Corporation (NYSE:X). Macro weakness, particularly in Europe and China, has reduced demand for steel and therefore for metallurgical coal, causing revenue to fall 11% in the third quarter of 2012 versus a year earlier. We don’t think that Walter or any other coal company- whether it is thermal coal or metallurgical coal focused- make particularly good investments (find out more about Walter and other coal companies).
Coliseum Capital Management acquired a total of nearly 2.5 million shares of Casual Male Retail Group, Inc. (NASDAQ:CMRG). According to our database of 13F filings, Coliseum had owned 2.4 million shares of the specialty mens’ retailer at the end of September (see more stocks that Coliseum owned). Coliseum is managed by Christopher Shackelton, who had previously worked at Watershed Asset Management, and Adam Gray. At a market cap of about $185 million, Casual Male trades at 17 times forward earnings estimates. The company reported flat revenue in its most recent fiscal quarter (which ended in October) compared to the same period in the last fiscal year.