Even though our data for the latest round of 13F filings shows that investors have been mainly betting on some of the largest and best companies from the tech, financial and healthcare sectors such as Apple, Actavis, and Citigroup, we have seen a significant increase in activity among some other companies. During the fourth quarter, funds that we track have poured significant amounts of capital into several stocks such as JD.Com Inc (ADR) (NASDAQ:JD), Yahoo! Inc. (NASDAQ:YHOO), and Amazon.com, Inc. (NASDAQ:AMZN), among others.
Following the bullish sentiment of big hedge funds with billions in assets under management can provide a competitive advantage for retail investors to obtain above market returns. Even though each individual investor, like David Einhorn of Greenlight Capital, or Steven Cohen of Point72 Asset Management has been able to provide impressive annualized returns over the years, it’s a totally different thing when a larger number of funds start investing in a particular stock. That’s because hedge funds usually acquire large stakes in companies, which means that they must conduct a detail-oriented research when choosing each stock. As such, taken collectively, that is often a good sign that the company’s fundamentals are very strong when multiple funds make moves into it.
That’s why in this article we will look into five stocks that have witnessed a significant increase in capital being invested during the last quarter of 2014.
On the first spot is JD.Com Inc (ADR) (NASDAQ:JD), a large-cap chinese e-commerce company. During the fourth quarter, the number of funds holding the stock only increased to 32 from 31. However, the aggregate value of the positions held by these funds surged to over $4.68 billion from just $508.85 million in the previous quarter. The increase in capital was mainly caused by Lei Zhang‘s Hillhouse Capital Management, one of the top funds that invest in Asian equities. During the fourth quarter, Hillhouse initiated a huge stake in JD.Com, which is valued at $3.53 billion and contains 152.42 million shares, representing roughly 80% of the fund’s equity portfolio.
The stock of JD.Com Inc (ADR) (NASDAQ:JD) lost around 10% during the fourth quarter. However, since the company went public in May 2014, the stock has gained around 30%. Analysts are also optimistic about the company, as the majority have ‘Buy’ ratings for JD.Com Inc (ADR) (NASDAQ:JD). Billionaire Stephen Mandel of Lone Pine Capital and Philippe Laffont of Coatue Management are two other investors bullish on the company as they initiated $204.04 million and $198.78 million stakes that contain 8.82 million shares and 8.59 million shares respectively.
Yahoo! Inc. (NASDAQ:YHOO) has seen an increase in popularity among funds from our database, as well as a significant inflow of capital. At the end of the fourth quarter, 99 funds reported holding shares of the company, versus 94 funds in the previous quarter. In addition, these funds held around $7.59 billion worth of the company’s stock, versus $5.31 billion a quarter earlier. The fact that Yahoo’s stock is undervalued was voiced by several investors in the last couple of months. Yahoo! Inc. (NASDAQ:YHOO) owns two large stakes, in Yahoo! Japan and Alibaba Group Holding Ltd (NYSE:BABA), the latter of which will soon be spun-off into a separate company in order to maximize shareholder value. It was a move that was expected by many shareholders of Yahoo, such as Jeff Smith of Starboard Value, who sent a letter to Yahoo CEO Marissa Mayer proposing a separation from both equity investments (though only Alibaba is being spun off at this time).
In this way, it comes as no surprise that investors have been bullish on Yahoo! Inc. (NASDAQ:YHOO) during the fourth quarter. Aside from Starboard, which owns 7.72 million shares of Yahoo, the company was also added to the equity portfolios of James Dinan’s York Capital Management and Christian Leone’s Luxor Capital Group, which reported ownership of 9.40 million shares and 9.22 million shares respectively in their latest 13F filings.