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Why Investors Are Piling Into SeaWorld, Hutchinson Technology, Freeport-McMoRan, ENSCO, and Noble

It’s a good day to be a bull on Wall Street as all three major indexes are substantially higher. The Dow is up by over 130 points, the S&P 500 is 0.6% in the green, and the NASDAQ has rallied by 28 points.

Among the stocks leading the way in terms of gains today are SeaWorld Entertainment Inc (NYSE:SEAS), Hutchinson Technology Incorporated (NASDAQ:HTCH), Freeport-McMoRan Inc (NYSE:FCX), ENSCO PLC (NYSE:ESV), and Noble Corporation Ordinary Shares (UK) (NYSE:NE). Let’s find out why traders are hitting the buy button on these five stocks and use the latest 13F data to see what some of the world’s most successful hedge funds think of them.

At Insider Monkey, we track over 750 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

Wall Street Bull

Wall Street Bull

SeaWorld Entertainment Inc (NYSE:SEAS) shares have surged by 7.82% in morning trading after Citi upgraded the stock to ‘Buy’ from ‘Neutral’, stating that the risk/reward looked favorable at current levels. Although SeaWorld announced that it would eventually suspend its dividend, analyst Jason Bazinet thought that SeaWorld management’s announcement that it would potentially use some of the dividend cash flow to buy back stock was a positive, as it suggests that the company did not violate any of its debt/credit covenants. Moreover, the company could also use some of the cash flow saved to potentially boost attendance. The bank has a $14 price target on the stock. Hedge funds weren’t too optimistic about SeaWorld Entertainment Inc (NYSE:SEAS) in the second quarter, as the number of funds in our system with holdings in SeaWorld Entertainment Inc (NYSE:SEAS) fell by four during the quarter to 16 at the end of June.

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Some Hutchinson Technology Incorporated (NASDAQ:HTCH) shareholders no doubt feel like they have just won the lottery today, after shares of the company surged by 166% on Tuesday, on strong volume. Traders were buying because the U.S. Federal Trade Commission granted the company early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which satisfies one of the remaining conditions to the closing of the pending merger between Hutchinson Technology and TDK Corporation, for total consideration of $4.00 per share. According to our data, five funds in our system owned a total of $10.86 million in shares of Hutchinson Technology Incorporated (NASDAQ:HTCH) on June 30, which accounted for 9.40% of the float.

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On the next page, we’ll find out why traders are piling into Freeport-McMoRan, ENSCO, and Noble Corporation.

Energy-related names Noble Corporation Ordinary Shares (UK) (NYSE:NE)ENSCO PLC (NYSE:ESV), and Freeport-McMoRan Inc (NYSE:FCX) are each up by between 4% and 6% today due to surging WTI futures, which are up by 2.2% to trade above $46 per barrel. Some traders are buying WTI due to yesterday’s solid EIA report, which showed U.S. commercial crude oil inventories dropping by 6.2 million barrels to 504.6 million. Although that is still historically high, the levels are much better than before.

In addition, the news that total motor gasoline inventories inched down by 3.2 million barrels and distillate fuel inventories rose by 2.2 million barrels was also cause for bullishness. Commodity investors hope for more positive news once OPEC and Russia begin their informal meeting in Algeria on September 26.

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In terms of individual hedge fund ownership, Carl Icahn‘s Icahn Capital owned 104 million shares of Freeport-McMoRan Inc (NYSE:FCX) at the end of June. Meanwhile, in terms of broader smart money ownership, 30 and 33 funds that we track were long ENSCO PLC (NYSE:ESV) and Noble Corporation Ordinary Shares (UK) (NYSE:NE) respectively at the end of June.

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Disclosure: None

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