5 Stocks That Had Hedge Funds Jumping For Joy Recently
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We have identified five stocks that had absolutely fantastic days last Thursday. Assuming the funds we track have not changed their holdings since the end of June, there were key funds that made big money on these price gains. The first company on our list is LogMeIn (NASDAQ: LOGM). The company was up 17% on Thursday—$3.40—posting earnings that came in at $0.18, compared to $0.16 ESP estimates. However, we are not ready to jump for joy just yet. The company now trades in excess of 190x earnings. Even on a forward earnings basis the company still trades at 30x, well above its peer average of around 15x. The company does have solid growth prospects as it makes its software compatible across various devices, not only for the PC, but smartphones and tablets as well. This breadth should drive its estimated 23% 5-year earnings CAGR, but we are avoiding the stock for now on valuation concerns.
Despite the fact that the company is down 35% year to date, the stock pop was a sight for sore eyes for top funds Ken Griffin (see his complete 13F portfolio here), Polar Capital, Israel Englander and Jim Simons. The top two fund owners Ken Griffin and Polar Capital, made big bets on the stock during 2Q. Griffin upped his 1Q stake over 2000% and Simons took an entirely new position, with each owning 410,000 and 265,000 shares, respectively, at the end of June. Griffin may have made over $1.4 million and Simons over $900,000 on the day’s massive move. Interestingly, one director in particular has been dumping his shares since mid-2012 and may have missed out.
Angie's List (NASDAQ: ANGI) is another company making big money for investors last week, with its market value seeing a surge of 25%, or $2.35 per share. The niche peer review website is expected to grow earnings annually at nearly 50% over the next five years, assuming competition stays virtually nonexistent. However, the company trades at incalculable trailing and forward P/E ratios given that it is still trying to perfect monetization and become profitable. The company's valuation on a P/S basis is above other internet company peers, trading 7.4x, while the industry is around 2.5x. We chose to stay on the sidelines for now, while Angie's List finds its way to positive earnings.
Ken Griffin made a little money on the stock's jump, but the big winner was TCS Capital Management. TCS increased their 1Q stake over 100% during 2Q, but more importantly the company had 11% of their 2Q 13F invested in Angie's List. Owning over 1 million shares the company may have made around $2.35 million.
Overstock.com (NASDAQ: OSTK) was up 15% last Thursday, or $1.90 per share. The company reported EPS that beat expectations by over 200%. Although Overstock is trading at over 150x trailing earnings, the company's forward P/E of 24x puts it much more in line with its peers. Even so, we are intimidated by the company's run up in share price this year, with the stock still trading up almost 100% year to date. After posting negative EPS for every quarter in 2011, we believe the enthusiasm of a few positive EPS postings is overdone, with the company still trading above its historical P/E of around 20x.
The two top funds invested in Overstock by far at the end of June were Fairfax Financial Holdings and Chou Associates Management, with Fairfax owning 3.3 million shares and Chou 2.3 million. Fairfax may have made out with $6.3 million, but Chou could have come out the best, given the firm had 4% of its 13F invested in the company. Chou's take could have been $4.3 million.
PSS World Medical (NASDAQ: PSSI) was up 30% on Thursday, or $6.70 per share, on the news the company was being bought. The purchaser, McKesson, announced it would buy the medical supply company for $2.1 billion or $29 per share. PSS was trading in line with its peers on a P/E basis before the announcement and now trades above 20x. The company's historical range has been between 15x and 25x, thus even with the acquisition premium it would appear McKesson is getting the company on the cheap side. PSS will complement McKesson's medical-surgical business and is expected to add $0.15-$0.25 to EPS in the year following finalization of the deal.
North Run Capital, with a new stake of 1.7 million shares, and Ken Fisher, with 900,000 shares, were the top 2Q fund owners for PSS. While Fisher may have made around $6 million, North Run may have made over $11 million, which could make for a good quarter for the fund, given it had over 4% of its 13F invested in PSSI.
Gardner Denver (NYSE: GDI) was up over 20% and over $12 on news that the company had hired Goldman Sachs to explore possible ways to unlock shareholder value. This includes a possible sale or merger of the company. Amidst a string of earnings misses every quarter for the past year, as well as resignation by the CEO, the company trades at 12x earnings, which is below its peer average of around 16x. Even with Friday's run up, the company's 12x P/E is still below its historical average around 15x. As a result, we still see run to grow even without an outright acquisition or merger of the company.
Notable investor Chuck Royce had over 2 million shares, alongside the top fund owner Jeffery Ubben, who owned 2.5 million shares. These funds made out better in Gardner than the funds in the other four companies. Royce may have cashed in $25 million and Ubben $30 million.
This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Overstock.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.