Quarterly 13F filings are the most comprehensive source of information regarding hedge fund positions, which has allowed us to develop profitable investment strategies based on their data (for example, the most popular small cap stocks among hedge funds outperform the market by an average of 18 percentage points per year). 13D and 13G filings are more up to date but only occur when a fund has a position of at least 5% of the total shares outstanding (which essentially means they are very rare for stocks with large market caps). We track 13D and 13G filings as well so that investors can use them as a source of free recommendations from hedge fund managers for further research. Here are five stocks that hedge funds have reported buying recently:
Billionaire Steve Cohen’s SAC Capital Advisors increased its holdings of SUPERVALU INC. (NYSE:SVU) from a very small number of shares at the beginning of January to a total of almost 11 million shares (see Cohen’s stock picks). SAC now owns 5.1% of the company. SUPERVALU INC. (NYSE:SVU) recently sold many of its supermarket brands to Cerberus Capital Management in order to focus on Save-A-Lot, its discount grocery store. Most grocery stores are currently trading at trailing earnings multiples between 11 and 15 as the industry is not particularly attractive. 35% of the float is held short, so many market players are bearish on the company.
Nuance Communications Inc. (NASDAQ:NUAN) had billionaire Carl Icahn report a large stake in the company. Nuance is a $6.8 billion market cap software company whose programs are used for a variety of text-to-speech functions (including in many smartphones). At that valuation and with Icahn owning over 9% of the company it would likely be one of his largest holdings (find Icahn’s favorite stocks). Revenue was up 28% in Nuance Communications Inc. (NASDAQ:NUAN)’s most recent quarter compared to the same period in the previous fiscal year, but the company reported net losses. Analysts are expecting high growth, but given recent financial performance we would avoid the stock.
Citadel Investment Group, managed by billionaire Ken Griffin and his team, was buying oil and gas company PDC Energy Inc (NASDAQ:PDCE) in the last three months and disclosed ownership of 1.5 million shares in a filing with the SEC. Check out more stocks Griffin likes. Most of PDC’s production in terms of energy equivalent is natural gas, but about 65% of revenue comes from oil sales due to the price differential between the two commodities. PDC is another popular short target, and the forward P/E of 28 is considerably higher than what we see at other energy companies including some with a focus on natural gas.
Adage Capital Management reported a position of a little over 4 million shares in Medivation Inc (NASDAQ:MDVN), the developer of prostate cancer drug Xtandi. Research more stocks Adage has been buying. Xtandi has only recently started being marketed, and Medivation is researching other channels for using the drug against cancer. The company is currently unprofitable, though analyst consensus is for earnings per share of 41 cents in 2014. Medivation used $100 million of cash on operations in 2012, but the company has about $300 million in cash, cash equivalents, and short term investments so cash should not be a problem for now.
Brian Taylor and the team at Pine River Capital Management were bullish on Anworth Mortgage Asset Corporation (NYSE:ANH), owning 9.1 million shares (or 6.4% of the outstanding shares) according to a filing. Anworth is a real estate investment trust investing in mortgage-backed and other real estate securities. Real estate investment trusts are required to distribute a large share of their taxable income to shareholders in order to preserve their favorable tax status; this often results in high dividend yields, and Anworth’s yield is currently over 9%. We would note that dividend payments have been showing a downward trend the last few years.
Disclosure: I own no shares of any stocks mentioned in this article.