The secret to getting the most out the hedge fund industry for profits is to filter out the noise and focus on selected sides of the smart money’s portfolios. Our research has shown that hedge funds’ sterling performance in key areas is often lost in the hubbub of their overall underperformance, which is often the result of their hedged positions and losses that come from short positions. For example, the best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% in the 12 months ending November 21, while the S&P 500 Index returned about 7.6% in the same period, with more than 51% of the stocks in the index failing to beat the benchmark. Hedge funds have the right resources that help them in pinpointing the stocks that have potential. Therefore mimicking the smart money is always helpful in making investment decisions. What’s more, in the third quarter, out of 659 hedge funds tracked by Insider Monkey, 627 funds, which had at least 5 long positions in companies valued at $1 billion or more, returned 8.3% on average from their long picks, a full 5.0 percentage above S&P 500 ETF returns.
Another example of hedge funds acing the market comes from billionaire Steve Cohen’s Point72 Asset Management, which returned 1.31% per month between 1999-2012 from its positions in small and mid-cap companies, versus S&P 500’s 0.32% a month in the same period. The Connecticut-based hedge fund thus beat the index by 0.99% per month in this period. Having this sterling performance in mind, let’s have a look at Point72 Capital’s top picks in the third quarter in companies with a market cap range of $5 billion-$10 billion.
Tractor Supply Company (NASDAQ:TSCO)
Point72 Asset Management upped its stake in Tractor Supply Company (NASDAQ:TSCO) by 282% in the third quarter, and ended the quarter with 765,900 shares with a net worth of $51.58 million. Last month, Northcoast Research upgraded Tractor Supply Company (NASDAQ: TSCO) to ‘Buy’ from ‘Neutral’ with a price target of $102. The stock is down over 9% year-to-date. 25 hedge funds tracked by Insider Monkey held positions in Tractor Supply Company (NASDAQ:TSCO) at the end of the third quarter.
PVH Corp (NYSE:PVH)
Steve Cohen’s family office upped its stake in PVH Corp (NYSE:PVH) by 17% in the third quarter, buying 80,715 new shares of the company, and concluding the period with a total of 552,615 shares with a total value of $61.06 million. Last week, UBS reiterated a ‘Buy’ rating for PVH Corp (NYSE: PVH), and raised its price target to $130.00 from $125.00. Shares of PVH Corp (NYSE:PVH) have gained over 50% in value since the start of the year. D. E. Shaw owns 1.42 million shares of PVH Corp (NYSE:PVH), as of the end of the third quarter.
On the next page, we will discuss some other small and mid cap picks of Steve Cohen.