Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

These Hedge Fund Trades Could Drastically Affect Your Holdings

 Hedge fund trades: Recently on Seeking Alpha, we covered four dividend stocks with four big hedge fund buyers. As usual, we took you through some of the most important hedge fund filings of the past few days. It’s important to cover the buying activity of the biggest hedge fund managers for its market-beating potential (discover the secrets of this strategy).

Glenn Krevlin

With that in mind, we’d like to take you through a couple small-cap hedge fund purchases that have been disclosed in the last few days. With smaller companies especially, it’s crucial for investors to understand which big investors have established stakes, how much stock they own, and if they have any plans for activism in the future.

Cal Dive

Cal Dive International, Inc. (NYSE:DVR) is an oil-related company that provides its clients with manned diving services related to pipe burial, rig retrieval and installation operations.  On Tuesday in a 13G with the SEC, Huber Capital disclosed that it had increased its stake in the company to 17.3% of all outstanding shares. This marked an increase of almost 50% from last quarter, and since it’s not an activist filing (in the form of a 13D), it’s safe to assume Huber is here for as a passive investor only.

With that being said, there’s one, very bullish secular trend that explains why any investor could justify being long. The company is naturally linked to the domestic offshore oil market, which is expected to expand over the next three decades chiefly due to Gulf of Mexico production, according to the EIA.

Cal Dive also supports operations of various companies in Latin America, Asia, Australia, the Middle East, the Mediterranean and West Africa. Of these overseas projects, Cal Dive’s presence in Southeast Asia and India look to be the most promising; Infield projects expenditure on offshore energy infrastructure to grow by more than 50% in this region over the next half-decade.

While Cal Dive doesn’t offer geographic-specific figures in its financial statements, it does disclose that about 65% of its revenues come from overseas, and it specifically mentions “strong utilization” in Southeast Asia as a main factor behind recent top line growth.

With these catalysts in mind, Wall Street also expects Cal Dive to translate this growth into bottom line prosperity. The company has not been profitable over the last two years, but sell-side analysts think it will come very close to breaking even by the fourth quarter of this year. Over the longer term, analysts expect Cal Dive to generate EPS growth of 75% next year, and annual growth of 12% over the next five years.

Considering these estimates, the stock is fairly inexpensive on an enterprise value-to-sales basis, trading at a multiple of just 0.75. This is significantly cheaper than peers like Oceaneering International (NYSE:OII) and TETRA Technologies, Inc. (NYSE:TTI), which sport EV/S multiples of 2.9 and 1.4, respectively. While some would argue that investors are discounting the stock because Cal Dive isn’t yet profitable, it appears that Huber Capital is betting that the company will capitalize on macro tailwinds to hit, or at least come close to the Street’s optimistic earnings forecasts.

Yongye International

Switching gears just a bit, but staying in the small-cap universe, Yongye International Inc (NASDAQ:YONG) is another stock to watch. Earlier this week in a 13D filing, Glenhill Advisors reported a 3.8% stake in the agricultural nutrient company. Glenhill is managed by Glenn Krevlin (see his bio here), who has been involved in successful activist campaigns before—such as his involvement in RedEnvelope—and it appears he wants to instigate change at Yongye as well.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.