Hedge Funds Just Bought These Stocks
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We track filings by hedge funds and other notable investors in order to get an idea of their activity- including which large cap stocks they like, which smaller-cap stocks might be good topics for further research, and what they think of different industries generally. Of course, investors can’t buy every stock that any particular manager is buying (and relatively up-to-date 13D and 13G filings are rarely filed for large-caps), but looking at filings can still be useful. Here are five stocks that hedge funds have reported a larger position in recently.
Steadfast Capital Management reported owning 8.9 million shares of Pandora Media (NYSE: P). This is an increase of close to 2 million shares since the beginning of October, according to the fund’s 13F for the third quarter of the year. Pandora’s revenues have been growing nicely- up about 60% in its most recent quarter compared to the same period in the previous year- but costs have been rising as well and the company is struggling with profitability. It’s not expected to have positive earnings in its next fiscal year either, and with much of its future depending on Apple not developing its own service, we think it should be avoided. The stock is widely shorted, indicating that a number of traders expect it to underperform expectations.
John Rogers’ Ariel Investments increased its holdings of Contango Oil & Gas (NYSE: MCF) from 1.6 million shares about two months ago to 2.4 million. Ariel now owns nearly 16% of the total shares outstanding (check out more of John Rogers' stock picks). Contango is an exploration and production company that primarily provides natural gas, natural gas liquids, and condensates. These fuels are seen as growth opportunities, but partly because of massive increases in production prices have remained low. Contango trades at 37 times trailing earnings, and its revenue decline by 33% in the third quarter compared to Q3 2011. We think that we would avoid it; companies like Chesapeake Energy might be cheaper ways to play natural gas.
BioDelivery Sciences International (NASDAQ: BDSI), a $130 million market cap biotechnology company (its average daily dollar volume appears to be over $1 million), had Adage Capital Management report owning 2.3 million shares (a bit over 6% of the company). See what other stocks Adage likes. Adage is co-managed by Phil Gross and Robert Atchinson, who had previously worked at Harvard Management. BioDelivery Sciences is up about 300% in the last year, though as a development stage biotech company it is unprofitable, and even its revenues are quite low.
David Abrams’ Abrams Capital Management bought close to 70,000 shares of Engility Holding (NYSE: EGL), bringing its position to 2.5 million shares (up from 2.2 million at the beginning of the quarter). Engility is an engineering company providing services to federal government agencies, including the Department of Defense. The stock is up 4% from its price recently after its July IPO. Wall Street analysts like the company, and so the current price is 7 times forward earnings estimates. However, revenue has been down and we’re not sure what impact a reduction in federal spending (especially defense spending) would have on the company.
Sprott Asset Management, managed by Eric Sprott, owned 4.2 million shares of Ghana gold miner Keegan Resources Inc. (NYSE: KGN). The $310 million market cap company (again, average daily dollar volume over the last three months seems to come out to over $1 million) is primarily in an exploratory phase and so cannot really be analyzed relative to its earnings. Sprott had owned 3 million shares at the end of the third quarter, according to its 13F filing (find more stocks Sprott owned). We’d prefer to look at more mature gold miners; Barrick Gold trades at only 10 times trailing earnings, for example, and might make a better buy than Keegan or a gold ETF.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has a long position in Apple. The Motley Fool has no positions in the stocks mentioned above. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!