3 Hot Mid-Caps to Buy Now According to Quant Billionaires

HollyFrontier Corp (NYSE:HFC)

Quants That Bought Shares of HFC in Q4: Ray Dalio’s Bridgewater Associates (16,123 shares), Jim Simons’ Renaissance Technologies (112,558 shares), David Harding’s Winton Capital (91,250 shares), Cliff Asness’ AQR Capital Management (1.21 million shares)

As with CF Industries Holdings, Inc. (NYSE:CF), three of the above positions were new ones in HollyFrontier Corp (NYSE:HFC), opened during the fourth quarter. Meanwhile, AQR Capital added 1.21 million shares to its position, lifting it to 1.38 million shares overall.

Is There Room to Run for HollyFrontier Corp (NYSE:HFC)?: There was a huge rally in HollyFrontier shares between May 1 and December 1 of last year which has several analysts skeptical about the stock’s prospects for 2018. In the fourth quarter, HollyFrontier exceeded revenue estimates by $220 million, while its adjusted EPS was $0.13 short of estimates as margins declined. That represented a notable slump from Q3, when both revenue and adjusted earnings easily toppled estimates. If crude differentials tighten further, HollyFrontier’s stretched valuation might be at risk.

Watsco Inc (NYSE:WSO)

Quants That Bought Shares of WSO in Q4: Ken Griffin’s Citadel Investment Group (8,824 shares), John Overdeck and David Siegel’s Two Sigma Advisors (16,666 shares), Jim Simons’ Renaissance Technologies (186,900 shares), David Harding’s Winton Capital (34,672 shares), D E Shaw, founded by David E. Shaw (8,918 shares)

While the bulk of the purchases listed above were relatively small, it’s still noteworthy that five different quants opened a new position in Watsco Inc (NYSE:WSO) during the fourth quarter. For reference, there are just nine hedge funds in our database that we consider to be full-blown quant funds. Overall hedge fund ownership also doubled during the fourth quarter to 22 funds.

Watsco Inc (NYSE:WSO) Rapidly Growing Online Sales, Dividend Payments: Watsco is growing into an intriguing income stock after the company announced that it will hike its dividend payments by another 16% beginning next month, to $5.80 per share, pushing its forward yield to 3.35%. Its dividend payments aren’t the only thing being aggressively expanded at the company, which grew online sales to 25% of its overall sales in 2017. Continued success in that area should allow Watsco to improve its operating margins in the coming years.

Disclosure: None