Hedge Funds Are Buying These Stocks

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

We like to track 13D and 13G filings from hedge funds because, while they only discuss how a fund or other notable investor is trading one stock, they are generally very recent and complement quarterly 13F filings very well. Investors cannot buy every stock that fund managers report buying, but reviewing recent buys might be useful in generating ideas or just seeing what hedge funds think about the markets. Here are five stocks that hedge funds and other notable investors have been buying recently:

Lone Pine Capital owned nearly 12 million shares of Dollar Tree (NASDAQ: DLTR) according to a filing with the SEC. Lone Pine, which is managed by billionaire and Tiger Cub Stephen Mandel, had initiated a position in the stock during the third quarter and had owned 3.9 million shares at the beginning of October (check out Mandel's stock picks). With Lone Pine having a large position in Dollar General as well, it appears that Mandel and his team are bullish on dollar stores. Dollar Tree trades at 16 times trailing earnings and, as might be expected, has a low beta of 0.2. With net income still growing strongly, and only a small valuation premium over Wal-Mart or Target, it might be a better retailer.

Prem Watsa, who has been called “the Warren Buffett of Canada” (see Watsa's favorite stocks), bought still more shares of paper company Resolute Forest Products (NYSE: RFP). His Fairfax Financial Holdings had owned about 19 million shares at the end of the third quarter, and now owns close to 26 million. Resolute’s revenue and operating income have been down, but the company isn’t recording as much in special charges and its earnings per share last quarter don’t look too bad compared to the stock price. We think it’s a good idea to watch the company to see if it can sustain its current business.

Point State Capital  had been selling shares of Verisign (NASDAQ: VRSN) during the third quarter, but recently began buying the stock and owned 4.7 million shares as of its most recent filing. VeriSign dropped in price recently after the government decided that it would not allow the company to raise prices for its .com registries. This is likely to weaken the company’s growth rates, which had been strong, and we’re not sure how well the business will perform going forward. Analyst estimates have the stock priced at 17 times forward earnings estimates. Read our analysis of Verisign compared to its peers.

UTi Worldwide (NASDAQ: UTIW) has seen P2 Capital Partners close in on 10% ownership of the company’s stock, with Claus Moller’s fund reporting a position of 9.8 million shares in the $1.4 billion market cap supply chain management company. In its most recent quarter, UTi reported declines in revenue and earnings by over 10% compared to the same period in the previous year, and the stock’s trailing P/E multiple is 25. Analyst expectations are for a much better 2013- the forward P/E is only 15- but we would avoid it.

Silver Point Capital, a hedge fund managed by Edward Mule, reported owning 1.6 million shares of Nexstar Broadcasting Group (NASDAQ: NXST), up from a bit under 500,000 shares at the beginning of October. Nexstar is a $300 million market cap broadcasting company whose TV networks reach close to 11 million viewers in the United States. The company reported high revenue growth in the third quarter compared to the same period in 2011. While earnings have been good on a trailing basis in terms of the stock’s current valuation, Wall Street analysts are skeptical of Nexstar’s future performance and the forward P/E multiple is 22.


This article is written by Matt Doiron and edited by Meena Krishnamsetty. 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. 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!

blog comments powered by Disqus