Hedge Funds Bought Navistar And These Other Stocks
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
13F filings are a very complete picture of what a hedge fund has been doing, but unfortunately they are only released six to seven weeks after the end of a quarter. 13D and 13G filings, while generally restricted to smaller-cap stocks, are much more up to date and therefore allow investors to know that a certain hedge fund manager has been buying a specific stock in the past week or two (in order to bring the fund above a 5% ownership threshold, or to add more shares from what had been previously reported in a filing). The investor in question can then examine these stocks more closely to see if it makes sense to purchase them. Here are five stocks that hedge funds have recently reported buying:
Billionaire Ken Griffin and his team at Citadel Investment Group reported owning 4.3 million shares of truck and engine manufacturer Navistar International (NYSE: NAV), which has been a target of billionaire activist investor Carl Icahn. Citadel had owned less than 600,000 shares at the beginning of October according to the fund’s 13F filing (see more stocks the fund owned). The company has been taking large losses, and is expected to be unprofitable in the current fiscal year (ending in October 2013) as well. After that point Wall Street analysts see Navistar’s fortunes improving, with a forward price-to-earnings multiple of 11. However, we think that the company is still too far out from positive earnings to be worth considering as a value investment.
According to a 13G filed with the SEC, Michael Johnston’s Steelhead Partners (find more stocks Steelhead likes) owns 4.1 million shares of Photronics (NASDAQ: PLAB), which comes out to 6.4% of the total shares outstanding. Photronics is a provider of photomasks which are in turn used by producers of semiconductors and flat panel displays. Revenue was down 15% in its most recent fiscal quarter compared to the same period in the previous fiscal year, and earnings dropped 59%. 11% of the outstanding shares are held short, though the trailing P/E multiple of 14 suggests that the stock has some upside potential if the company can end its declining performance.
Steelhead Partners also now owns 2.7 million shares of development-stage biotechnology company Enzon Pharmaceuticals (NASDAQ: ENZN). The 13G filed with the SEC has the fund owning 5.8% of the total shares outstanding; Steelhead had owned some of Enzon’s debt in its most recent 13F filing, but did not report any equity ownership. The company’s products in development primarily consist of treatments for cancer patients. The stock is down 32% over the last year, though in its most recent quarterly report Enzon held a large cash position and so the downside from this point may be limited.
Royce & Associates now owns 8.3 million shares of Molex Incorporated (NASDAQ: MOLX), which according to the filing with the SEC is a little over 10% of the outstanding shares. This fund, managed by Chuck Royce, tends to take concentrated positions in small-cap and mid-cap stocks (check out Royce's stock picks); Molex has a market cap of about $5 billion. We don’t think that the stock is a good value, as its trailing P/E is 19 and its operating and net income were both down in its last fiscal quarter versus a year earlier. Some of its peers might make better buys.
Royce also reported that it had increased its stake in Brady Corp (NYSE: BRC), which is best known for its identification and security solutions services business, to 3.8 million shares. Revenue and earnings have been down slightly at Brady if we strip out the effect of a small loss on the sale of businesses. The P/E multiples are in the teens, while some of the company’s peers that we looked at were trading at a discount even though they boast larger market caps and their businesses have actually been growing. Read our analysis of Brady compared to its peers.
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 position in any of the stocks mentioned. 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!