We follow hedge fund activity in 13D and 13G filings so that we can get the most up to date information on how hedge funds are buying large percentage stakes in publicly traded companies (unfortunately, this generally limits the companies in question to small and mid caps). These picks from hedge fund managers can be reviewed and investors can decide whether or not to buy the stock as well if they do further research and become convinced that it’s a smart move. Here are five stocks that hedge funds have been buying recently:
Corvex Capital, which is managed by former Carl Icahn employee Keith Meister, added slightly to its position in ADT Corp (NYSE:ADT) and now owns 11.7 million shares or 5.1% of the total shares outstanding. ADT is a spinout from Tyco International, and provides electronic security and monitoring systems for homes and businesses. Hedge funds often like to invest in spinouts because management of the new company can focus more on their core operations without having to worry about being part of a larger business (read more about investing in spinouts). At 22 times consensus earnings for the fiscal year ending in September 2014, ADT would have to crush expectations to be a good buy at these prices. We think it’s best to avoid the stock. Find Corvex’s favorite stocks.
Billionaire Ken Griffin’s Citadel Investment Group (see Griffin’s stock picks) reported a position of 1.2 million shares in The WhiteWave Foods Co (NYSE:WWAV), a substitute and organic dairy company which is itself a spinout of Dean Foods. As at ADT, the market appears to be counting on operations to improve considerably now that WhiteWave is independent. The forward P/E is 22 here as well. Given the company’s trendy product line, it’s not surprising that WhiteWave has been reporting good growth numbers. However, we think it’s worth waiting to see more results from WhiteWave as an independent company, particularly as a number of traders seem to have decided to short the stock.