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Hedge Funds Have Bought Lear, Trina Solar, and More

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We track filings from hedge funds and notable investors and use them for a few different purposes. By aggregating 13G filings, we can develop investment strategies including imitating hedge funds’ most popular stocks in various categories. The most popular small cap stocks among hedge funds stand out in particular; the small cap stocks which we listed as the most popular in our August newsletter outperformed the S&P 500 by 18 percentage points between September and January (read more about our hedge fund strategies). We can also use individual 13Fs, or 13D and 13G filings which are made public shortly after a fund takes or changes a large percentage stake in a company, as free stock picks which can then be evaluated further so that investors can decide whether or not they might be good buys. Here are five stocks that hedge funds have bought recently:

Marcato Capital Management, a hedge fund managed by former Pershing Square employee Richard McGuire, reported a 5.2% stake in auto parts company Lear Corporation (NYSE:LEA). It appears that all 5 million shares were purchased since the beginning of October (find more stocks in Marcato’s portfolio). Lear’s pretax income doubled in the fourth quarter of 2012 versus a year earlier, primarily due to higher gross margins but also thanks to a slight increase in sales. The stock trades at 11 times expected earnings for 2013, and we think that it may be worth considering alongside other cheap auto related companies.

Ken Fisher FISHER ASSET MANAGEMENTBillionaire Ken Fisher’s Fisher Asset Management now owns 2.2 million shares of Veeco Instruments Inc. (NASDAQ:VECO) per a recent filing, giving the fund 5.6% of the total shares outstanding (see more of Fisher’s stock picks). Veeco provides equipment to manufacturers of electronic equipment such as LEDs, and has a market capitalization of $1.2 billion. The third quarter of 2012 shows a sharp decline in business from the same period in 2011, with revenue and earnings down by 50 to 65 percent. The trailing P/E multiple is 19, so Fisher and other bulls are dependent on this trend not only reversing but also resulting in decent growth rates.

Trina and two more stocks that funds have been buying:

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