Hedge Funds Have Bought SM Energy, Ciena, and More

We track a variety of filings from hedge funds and other notable investors because they each have advantages and disadvantages. The greater comprehensiveness of 13F filings makes it easier for us to develop profitable investment strategies; for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about imitating hedge fund small cap picks). However, many investors object to the delay which accompanies 13Fs. Hedge funds also file 13Ds or 13Gs with the SEC shortly after acquiring a 5% stake in a company or changing that position; of course given the 5% figure this generally only occurs for small-cap or occasionally mid-cap stocks, but the move is more current. Here are five stocks that hedge funds have bought recently:

SAC Capital Advisors, which is managed by billionaire Steve Cohen, now owns 3.4 million shares of oil and gas exploration and production company SM Energy Co. (NYSE:SM). Find Cohen’s favorite stocks. SM, which is active in many U.S. shale plays, has a market capitalization of $3.8 billion. The company’s production mix is tilted towards natural gas, which has encountered a difficult pricing environment in the last couple years due to enormous supply growth. As a result SM’s operating income has collapsed. Wall Street analyst expectations imply a forward P/E of 18, but that is likely dependent on a recovery in the nat gas market.

Billionaire Ken Griffin’s Citadel Investment Group reported a position of 5.2 million shares in Ciena Corporation (NASDAQ:CIEN), up from about 1 million shares at the end of December (see Griffin’s stock picks). Ciena is a communications equipment and software company with a market capitalization of $1.7 billion. The company crushed expectations in its most recent quarterly report, and with about 30% of the outstanding shares held short at the time the stock rallied strongly. Still, we would like to see Ciena repeat its strong performance and prove that future results will be at least as strong as in its good quarter.

Find three more stocks hedge funds have been buying: