Shortly after taking a 5% position in a stock or making a significant change to a large position, hedge funds and other institutions are required to publicly disclose the ownership of the stock. This results in a way to track what particular investors think about particular stocks on a relatively up-to-date basis, with the catch being that generally (though not always, as we shall see) the 5% threshold is only ever reached in small-cap and mid-cap stocks. It is, of course, important to think critically about these companies before imitating any investor’s move. Here are four stocks that hedge funds and other notable investors have been buying recently:
Billionaire activist investor Carl Icahn has been doing more than beating up on poor Bill Ackman. Earlier this month, we had reported on news that his group was buying a significant number of shares in Transocean LTD (NYSE:RIG), the contract driller associated with the Deepwater Horizon disaster. Read our previous article on Transocean. Now he has reported a position of over 20 million shares, or 5.6% of the company. This is an enormous buy for Icahn; Transocean has a market capitalization of over $20 billion, meaning that he controls over $1 billion in stock (making this one of his largest positions). Compare his $1 billion in Transocean to other holdings. Wall Street analysts believe there is opportunity at Transocean, with a 2013 P/E of 12 and a five-year PEG ratio of 0.7. Icahn has announced that he will push for Transocean to pay a special dividend of $4/share; the company most recently reported $6 billion in cash and $14 billion in debt on its balance sheet.
Murray Stahl and the rest of his investment team at Horizon Kinetics have upped their stake in The Wendy’s Company (NASDAQ:WEN) to a total of 23 million shares. This equates to 6% of the total shares outstanding. Billionaire Nelson Peltz’s Trian Partners is a major shareholder in Wendy’s (see Peltz's stock picks). Wendy’s reported 8 cents per share of earnings for the fourth quarter of 2012; analyst had expected EPS of 4 cents for that quarter and only 19 cents for all of 2013. The current-year P/E based on that target figure is 27, but it’s quite possible that Wendy’s will report results above that figure. Quick service restaurants tend to trade at relatively high multiples in any case; Burger King Worldwide Inc (NYSE:BKW) is valued at 25 times consensus earnings for 2013.
Horizon Kinetics was buying a shopping mall owner as well: