5 Stocks That Made Hedge Funds Millions Last Week
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We have identified five stocks that had absolutely fantastic days last week. Assuming the funds we track have not changed their holdings since the end of June, there were a few key funds that made big money on these stock pops. The first company on our list is DeVry (NYSE: DV). DeVry saw a nice boost in its stock the other week on Friday, October 26, up over 25%, on better than expected earnings. The company's 3Q EPS came in at $0.49, a surprise that beat estimates by over 60%. DeVry is looking at a semi-turnaround that includes aligning cost structure and enrollment levels.
Based on enrollment weakness, the company is cutting over 550 positions and expects to have cost savings of $50 million in 2013. In short, its online education model continues to be challenged. The performance of many online education companies has suffered, as the majority are facing regulatory scrutiny by the Department of Education. On a valuation basis, DeVry trades on the high end, at a P/E of 13x. Apollo and other online close competitors, meanwhile, trade at a cheaper valuation, at around 7x earnings. Despite its earnings beat, we don't see a particularly attractive investment opportunity in DeVry at the moment.
In the hedge fund industry, Ariel Investments had over 3% of their 2Q 13F invested in the online education company, and Jim Simons upped his 1Q stake over 1000%. On DeVry’s one day stock pop of almost 25%, Ariel may have made as much as $24 million.
Quanta Services (NYSE: PWR) was up almost 10% - $2.40 in real terms - on Wednesday, October 31, on raised EPS guidance for 2012, now expected to grow more than 100% this year. The company should be driven by contract services for natural gas and pipeline, as its industry continues to see slow, but improving demand. Quanta should also see positive demand from the aftereffects of Hurricane Sandy. With the recent run up in the stock’s price, though, it is now trading at the top end of the construction and engineering industry at 20x earnings. Comparatively speaking, other major competitors such as Fluor at 15x, Chicago Bridge at 13x and Jacobs Engineering at 14x, are all cheaper.
Quanta's most bullish fund at the end of last quarter was Peconic Partners LLC, with over 1.8 million shares, or almost 12% of its 2Q 13F. Peconic may have made as much as $4.3 million on Wednesday. Meanwhile, other top firms with over 650,000 shares each were Chuck Royce and Israel Englander, possibly making around $1.5 million each; check out all funds making out well on Quanta.
Netflix (NASDAQ: NFLX) was up over 13% on Wednesday, October 31, on the announcement that billionaire investor Carl Icahn had taken a 10% stake in the company; see if you should follow Icahn into Netflix. Although this might be a near-term positive for the company, we still do not see it as a reason to buy into the hype. Netflix now trades at a 100x P/E, far above its historical P/E of around 30x. This, coupled with competition from other major cable providers, satellite companies and Amazon, makes us cautious on Netflix’s long-term growth prospects.
At the end of 2Q, Netflix's top firm was Jana Partners with 800,000 shares; this was a 100% increase from 1Q. The firm may have made upwards of $7.6 million. Additionally, Nantahala Capital Management initiated a new position of 575,000 shares. George Soros and Lone Pine Capital also took new positions in the company during 2Q, though it remains to be seen exactly how they will respond to Icahn's latest move.
Abercrombie & Fitch (NYSE: ANF) saw its stock pop 8%, around $2.40 in real terms, on Thursday, November 1. The move was driven by speculation that the retailer could be taken private. Abercrombie still has room to grow, as it embarks on international expansion and focuses on under-penetrated markets. Its recent openings of Gilly Hicks stores in Europe will likely see weakness, due to the obvious macro-related uncertainties in this region. These fears, combined with valuation issues lead us to remain cautious after the pop. The company now trades at 30x earnings, compared to competitors Aeropostale and American Eagle, which trade at 16x and 26x, respectively.
At the end of last quarter, the top fund invested in Abercrombie was Relational Investors at 3.1 million shares, which was a 50% increase from 1Q; the position made up close to 2% of the firm’s 2Q 13F portfolio. Meanwhile other firms taking new positions of over 750,000 shares in size were Samlyn Capital and Royal Capital. Relational Investors may have made as much as $7.4 million shares on the stock's one-day move.
TripAdvisor (NASDAQ: TRIP) reported 3Q results that that beat consensus estimates by almost 10%, sending the stock up 19% on Friday, November 2. TripAdvisor's major competitors were also up big after their respective earnings announcements, with Expedia up 15% and Priceline up 10%. Despite TripAdvisor's strong growth, we see headwinds resulting from the company's efforts to diversify its revenue stream beyond advertisements. The company now trades at the high end of the P/E spectrum at 27x. Close competitor Priceline might have some of the best all-around prospects in the industry, boasting an expected five-year EPS CAGR of 21%, compared to CAGR of 16%.
Regarding TripAdvisor, fund interest was quite robust during the second quarter. The top five funds invested each had over 3% of their 13F portfolios in shares of the company. The top fund by far was Viking Global with 8.9 million shares, and other notable investor John Griffin was in second place with 5.6 million shares of the stock. These particular firms may have made over $30 million each on TripAdvisor's recent earnings beat.
Interested in Additional Analysis?
The precipitous drop in Netflix shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep pocketed, rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These kinds of issues are a must know for investors, which is why The Motley Fool released a brand new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to both buy and sell the stock. They’re also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.
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 owns shares of Netflix and TripAdvisor. Motley Fool newsletter services recommend Netflix and TripAdvisor. 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.