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Hedge Funds Have Bought Herbalife, Tempur-Pedic, and More

While 13F filings provide the most complete picture of what stocks hedge funds own, they are somewhat out of date by the time they are released. This actually isn’t much of a disadvantage- we’ve actually found that despite the lag the most popular small cap stocks among hedge funds, as determined by 13Fs, produce an average excess return of 18 percentage points per year (learn more about our small cap strategy). Still, we do also follow more up-to-date 13D and 13G filings (though these only occur when a fund crosses the 5% ownership threshold or makes changes to such a position). Here are five stocks that hedge funds have bought recently:

Billionaire Carl Icahn has increased his holdings of Herbalife Ltd. (NYSE:HLF) to a total of 16.4 million shares. Icahn began buying Herbalife shortly after fellow billionaire Bill Ackman gave a public presentation explaining his own short position in the stock, and the two dueled on CNBC earlier this year. Find more stock picks from Carl Icahn and Bill Ackman’s Pershing Square. Ackman argued that Herbalife was a pyramid scheme, and the most recent data shows that 34% of the outstanding shares are held short. The stock is trading about where it was before Ackman made his short case.

ICAHN CAPITAL Carl IcahnAnn Inc (NYSE:ANN) had billionaire Steve Cohen’s SAC Capital Advisors disclose ownership of 2.6 million shares of stock. This comes out to 5.3% of the total shares outstanding and is up from about 540,000 shares at the beginning of January (research more stocks SAC owned). The $1.5 billion market cap retailer of women’s apparel and accessories beat expectations for the fourth quarter of its fiscal year, with both top and bottom lines showing moderate growth compared to the same period in the previous fiscal year (although Ann did report negative comp sales). The trailing P/E is 15, which seems about in line with the growth rates Ann is experiencing.

See three more stocks hedge funds have been buying:

Senator Investment Group, a hedge fund managed by Doug Silverman, reported a position of more than 5 million shares in Tempur-Pedic International Inc. (NYSE:TPX). See more of Silverman’s stock picks. The mattress company is about set to acquire competitor Sealy Corporation (NYSE:ZZ) after receiving approval from U.S. regulators; with the industry suffering recently, consolidation may push up prices and help Tempur-Pedic and its peers. Tempur-Pedic’s earnings were down by over 50% last quarter compared to the fourth quarter of 2011, as revenues fell and margins shrunk. When we looked at the company we thought that Select Comfort Corp. (NASDAQ:SCSS) was a cheaper stock which should also benefit from reduced competition.

Larry Robbins’s Glenview Capital increased its stake in $3.5 billion market cap engineering and technical services company URS Corp (NYSE:URS) to a total of 4.6 million shares (check out more stocks Robbins is buying). URS trades at 11 times trailing earnings, even though its financial performance in the fourth quarter of 2012 was fairly strong: revenue was up 24% versus a year earlier, and operating income grew by 17% if we add back some special items from Q4 2011. Even after high interest expenses pretax income was up a bit, and given the pricing we would be interested in taking a closer look at the company.

Partner Fund Management has added shares of Health Net, Inc. (NYSE:HNT) and had almost 4 million shares of stock in its portfolio according to the filing. Health Net is a provider of health care plans with a market capitalization of $2.2 billion. Analyst expectations for 2014 have the stock trading at 11 times forward earnings estimates, which is actually a bit higher than where large health insurers trade (though HealthNet does have a large amount of cash and liquid investments on its balance sheet). The stock is down 27% in the last year.

Disclosure: I own no shares of any stocks mentioned in this article.

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