With the holidays behind us, a new wave of filings has been set off, revealing hedge funds’ latest moves. Let’s forget about China and the falling oil prices for a moment and see what the hedge fund heavyweights have busied themselves with. In this article we’ll take a look at a stock Warren Buffett has an insatiable appetite for as well as what was on the shopping list of David Abrams and Nathaniel August.
Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).
David Abrams seems to feel good about college bookstores, having recently boosted his investment in Barnes & Noble Education Inc (NYSE:BNED). According to a filing with the Securities and Exchange Commission, his fund, Abrams Capital Management, has acquired 488,348 shares of Barnes & Noble, at prices between $8.73 and $8.94 per unit. Following these transactions, the fund holds 8.71 million shares which represent approximately 18% of the company’s outstanding shares.
A former colleague of value investor Seth Klarman, Abrams started his fund in 1999 and had more than $8 billion in assets under management at the end of 2013. His equity portfolio carried a market value of $1.4 billion at the end of 2015’s third quarter, with more than half of that represented by tech stocks, while financial stocks accounted for roughly 20%. The Western Union Company (NYSE:WU) is his biggest bet, with Abrams Capital holding 21.6 million shares, while Microsoft Corporation (NASDAQ:MSFT) is just behind that, with Abrams owning 4.98 million shares. Both positions were unchanged during the quarter.
On the next page we’ll look at the energy company Nathaniel August is so interested in and talk about Buffett’s latest play.