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Hedge Funds Like These European Companies; Should You?

In BP plc (ADR) (NYSE:BP), there were 33 funds from our database holding shares heading into 2018, up by seven compared to the previous year, but this number inched down by one during the fourth quarter. Since the beginning of the year, BP plc (ADR) (NYSE:BP)’s stock is up by 3%. Recently, BP plc (ADR) (NYSE:BP) and Petrobras (NYSE:PBR) entered into a strategic alliance to explore potential business opportunities together. The company has also announced plans to keep carbon emissions flat to 2025 through focusing on more gas production and reducing methane leakeges. BP plc (ADR) (NYSE:BP) also said it will invest up to $500 million per year on renewable energy. As part of its green initiative, BP plc (ADR) (NYSE:BP) has teamed up with Tesla Inc. (NASDAQ:TSLA) to build its first battery storage project at one of its 13 wind farms in the US.

 

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There were 35 funds bullish on Constellium NV (NYSE:CSTM) at the end of last year, versus 28 funds at the end of 2016 and 36 funds at the end of the third quarter. Constellium NV (NYSE:CSTM) is a Netherlands-based global producer of aluminum semi-products. Recently, aluminum prices has reached a new seven-year high of over $2,500 per metric ton after the US introduced sanctions against Rusal, the largest aluminum producer in the world outside China. However, prices retreated slightly following speculations that the Russian government might nationalize Rusal, although it’s unclear how it would work and if it would help the company avoid sanctions, since aluminum buyers in Europe and USA might still be unwilling to work with a company controlled by the Kremlin. Over the past 12 months, Constellium NV (NYSE:CSTM)’s stock more than doubled on higher aluminum prices and improving fundamentals in the industry. However, the company still has to turn to profitability and to do that it has to focus on reducing costs and improving efficiency. Improving profitability should also help Constellium NV (NYSE:CSTM) with its debt ratings, which are currently in junk territory.

 

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Fiat Chrysler Automobiles NV (NYSE:FCAU) saw the number of investors long its stock increase by seven during the fourth quarter and by 12 over the last year to 36 funds that held shares at the end of 2017. For the last couple of years, Fiat Chrysler Automobiles NV (NYSE:FCAU)’s CEO Sergio Marchionne has been pushing for a consolidation in the automotive industry and tried to approach General Motors Co (NYSE:GM) regarding a potential merger. At the same time, Marchionne has been focusing on improving the company’s fundamentals and cleaning the portfolio. During his tenure at Fiat Chrysler Automobiles NV (NYSE:FCAU), Marchionne orchestrated the spin-off of trucks and tractor maker CNH Industrial (NYSE:CNHI) and supercar maker Ferrari NV (NYSE:RACE). Recently, Fiat Chrysler Automobiles NV (NYSE:FCAU) announced plans to separate auto parts business Magneti Marelli by the end of this year or in early 2019. Moreover, there are speculations that after Marchionne leaves Fiat Chrysler Automobiles NV (NYSE:FCAU) next year, the company will be open for a big merger, with Ford Motor Company (NYSE:F) and Volkswagen named among the potential buyers, but some Chinese automakers might also be interested.

 

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In Yandex NV (NASDAQ:YNDX), 44 investors disclosed long positions as of the end of 2017, down by one over the quarter, but up by 13 over the year. Yandex NV (NASDAQ:YNDX) is a major player on the Russian search market and enjoys a leading market share of 55%, even though it has to compete with Alphabet Inc. (NASDAQ:GOOGL)’s Google, which commands 42%. In addition, over the last couple of years, Yandex NV (NASDAQ:YNDX) has pursued new ventures, such as ride sharing, music streaming and payment services, as well as a voice-enabled digital assistant (called Alice) and a food delivery business. Yandex NV (NASDAQ:YNDX) has even developed a self-driving car that is currently being tested and has launched an e-commerce joint venture with Russia’s largest bank, Sberbank. Yandex NV (NASDAQ:YNDX)’s stock is trading at around 37.3 times forward earnings, which is higher than the market average, but it’s reasonable for a tech company.

 

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NXP Semiconductors NV (NASDAQ:NXPI) is the favorite European company among the investors we track, with the number of funds holding shares having grown by 11 to 92 over the fourth quarter and by 12 compared to the end of 2016. One of the reasons why NXP Semiconductors NV (NASDAQ:NXPI) is so popular among hedge funds is the fact that it is in the process of being acquired by Qualcomm Inc (NASDAQ:QCOM). The offer of $110 per share was made by Qualcomm Inc (NASDAQ:QCOM) in 2016, but NXP Semiconductors NV (NASDAQ:NXPI)’s stock traded below this level for the first half of 2016. In December 2017, activist investor Paul Singer’s Elliott Advisors said that it would oppose the deal and asked for the offer to be raised to $135. In February, Qualcomm sweetened the deal to $127.50 per share and the stock is still trading lower amid concerns that the deal might no get through as Chines regulators are looking for more concessions before approving the transaction. Even if the deal doesn’t go through, NXP Semiconductors NV (NASDAQ:NXPI) looks like an attractive stock that is trading at just 14.50 times forward earnings, well below the industry average.

 

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Disclosure: none

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